DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Part 412 

[CMS-1448-P] 

RIN 0938-AR66 

Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for 

Federal Fiscal Year 2014 

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule. 

SUMMARY: This proposed rule would update the prospective payment rates for inpatient 

rehabilitation facilities (IRFs) for federal fiscal year (FY) 2014 (for discharges occurring on or 

after October 1, 2013 and on or before September 30, 2014) as required by the statute. We are 

also proposing to revise the list of diagnosis codes that are used to determine presumptive 

compliance under the “60 percent rule,” update the IRF facility-level adjustment factors, revise 

sections of the Inpatient Rehabilitation Facility-Patient Assessment Instrument, revise 

requirements for acute care hospitals that have IRF units, clarify the IRF regulation text 

regarding limitation of review, update references to previously changed sections in the 

regulations text, and revise and update quality measures and reporting requirements under the 

IRF quality reporting program. 

DATES: To be assured consideration, comments must be received at one of the addresses 

provided below, no later than 5 p.m. on [OFR—insert date 60 days after the date of filing for 

public inspection at OFR.] 

ADDRESSES: In commenting, please refer to file code CMS-1448-P. Because of staff and 
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resource limitations, we cannot accept comments by facsimile (FAX) transmission. 

 You may submit comments in one of four ways (please choose only one of the ways 

listed): 

1. Electronically. You may submit electronic comments on this regulation to 

http://www.regulations.gov. Follow the "Submit a comment" instructions. 

 2. By regular mail. You may mail written comments to the following address ONLY: 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-1448-P, 

P.O. Box 8016, 

Baltimore, MD 21244-8016. 

Please allow sufficient time for mailed comments to be received before the close of the 

comment period. 

3. By express or overnight mail. You may send written comments to the following 

address ONLY: 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-1448-P, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your 

written comments ONLY to the following addresses prior to the close of the comment period: 
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a. For delivery in Washington, DC-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

(Because access to the interior of the Hubert H. Humphrey Building is not readily 

available to persons without Federal government identification, commenters are encouraged to 

leave their comments in the CMS drop slots located in the main lobby of the building. A stampin clock is available for persons wishing to retain a proof of filing by stamping in and retaining 

an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

If you intend to deliver your comments to the Baltimore address, please call telephone 

number (410) 786-7195 in advance to schedule your arrival with one of our staff members. 

 Comments erroneously mailed to the addresses indicated as appropriate for hand or 

courier delivery may be delayed and received after the comment period. 

For information on viewing public comments, see the beginning of the 

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 
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Gwendolyn Johnson, (410)786-6954, for general information about the proposed rule. 

Caroline Gallaher, (410) 786-8705, for information about the quality reporting program. 

Susanne Seagrave, (410)786-0044 or Kadie Thomas, (410) 786-0468, for information about the 

proposed payment policies and the proposed payment rates. 

SUPPLEMENTARY INFORMATION: 

 The IRF PPS Addenda along with other supporting documents and tables referenced in 

this proposed rule are available through the Internet on the CMS website at 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. 

Inspection of Public Comments: All comments received before the close of the comment period 

are available for viewing by the public, including any personally identifiable or confidential 

business information that is included in a comment. We post all comments received before the 

close of the comment period on the following website as soon as possible after they have been 

received: http://www.regulations.gov. Follow the search instructions on that website to view 

public comments. 

 Comments received timely will also be available for public inspection as they are 

received, generally beginning approximately 3 weeks after publication of a document, at the 

headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To 

schedule an appointment to view public comments, phone 1-800-743-3951. 

Executive Summary 

A. Purpose

This proposed rule updates the payment rates for inpatient rehabilitation facilities (IRFs) 

for federal fiscal year (FY) 2014 (for discharges occurring on or after October 1, 2013 and on or 
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before September 30, 2014) as required under section 1886(j)(3)(C) of the Social Security Act 

(the Act). Section 1886(j)(5) of the Act requires the Secretary to publish in the Federal Register

on or before the August 1 that precedes the start of each fiscal year, the classification and 

weighting factors for the IRF prospective payment system’s (PPS) case-mix groups and a 

description of the methodology and data used in computing the prospective payment rates for 

that fiscal year. 

B. Summary of Major Provisions

 In this proposed rule, we use the methods described in the FY 2013 IRF PPS notice 

(77 FR 44618) to update the Federal prospective payment rates for FY 2014 using updated 

FY 2012 IRF claims and the most recent available IRF cost report data. We are also proposing 

to revise the list of diagnosis codes that are used to determine presumptive compliance under the 

“60 percent rule,” update the IRF facility-level adjustment factors using an enhanced estimation 

methodology, revise sections of the Inpatient Rehabilitation Facility-Patient Assessment 

Instrument, revise requirements for acute care hospitals that have IRF units, clarify the IRF 

regulation text regarding limitation of review, update references to previously changed sections 

in the regulations text, and revise and update quality measures and reporting requirements under 

the IRF quality reporting program. 

C. Summary of Costs, Benefits and Transfers

Provision Description Total Transfers 

FY 2014 IRF PPS payment rate 

update 

The overall economic impact of this proposed rule is 

an estimated $150 million in increased payments from 

the Federal government to IRFs during FY 2014. 

 To assist readers in referencing sections contained in this document, we are providing the 

following Table of Contents. 
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Table of Contents 

I. Background 

 A. Historical Overview of the Inpatient Rehabilitation Facility Prospective Payment 

System (IRF PPS) 

 B. Provisions of the Affordable Care Act Affecting the IRF PPS in FY 2012 and 

Beyond 

 C. Operational Overview of the Current IRF PPS 

II. Summary of Provisions of the Proposed Rule 

A. Proposed Updates to the IRF Federal Prospective Payment Rates for Federal 

Fiscal Year (FY) 2014 

 B. Proposed Revisions to Existing Regulation Text 

III. Proposed Update to the Case-Mix Group (CMG) Relative Weights and Average Length 

of Stay Values for FY 2014 

IV. Proposed Updates to the Facility-Level Adjustment Factors for FY 2014 

A. Background on Facility- Level Adjustments 

B. Proposed Updates to the IRF Facility-Level Adjustment Factors 

C. Budget Neutrality Methodology for the Updates to the IRF Facility-Level 

Adjustment Factors 

V. Proposed FY 2014 IRF PPS Federal Prospective Payment Rates 

 A. Proposed Market Basket Increase Factor, Productivity Adjustment, Other Adjustment, 

and Secretary’s Recommendation for FY 2014 

 B. Secretary’s Proposed Recommendation 

 C. Proposed Labor-Related Share for FY 2014 
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 D. Proposed Area Wage Adjustment 

 E. Description of the Proposed IRF Standard Conversion Factor and Payment Rates for 

FY 2014 

 F. Example of the Methodology for Adjusting the Proposed Federal Prospective 

Payment Rates 

VI. Proposed Update to Payments for High-Cost Outliers Under the IRF PPS 

A. Proposed Update to the Outlier Threshold Amount for FY 2014 

 B. Proposed Update to the IRF Cost-to-Charge Ratio Urban and Rural Ceilings 

VII. Proposed Refinements to the Presumptive Compliance Criteria Methodology 

A. Background on the Compliance Percentage 

B. Proposed Changes to the ICD-Q-CM-Codes that Meet the Presumptive Compliance 

Criteria 

VIII. Proposed Non-Quality Related Revisions to IRF-PAI Sections 

 A. Proposed Updates 

 B. Proposed Additions 

 C. Proposed Deletions 

 D. Proposed Changes 

IX. Proposed Technical Corrections to the Regulations at §412.130 

X. Proposed Revisions to the Conditions of Payment for IRF Units Under the IRF PPS 

XI. Proposed Clarification of the Regulations at §412.630 

XII. Proposed Revision to the Regulations at §412.29 

XIII. Proposed Revisions and Updates to the Quality Reporting Program for IRFs 

 A. Background and Statutory Authority 
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 B. Quality Measures Previously Finalized and Currently in Use for the IRF Quality 

Reporting Program 

C. Proposed New IRF QRP Quality Measures Affecting the FY 2016 and FY 2017 IRF 

PPS Annual Increase Factor, and Subsequent Year Increase Factors 

D. Proposed Changes to the IRF-PAI That Are Related to the IRF Quality Reporting 

Program 

E. Proposed Change in Data Collection and Submission Periods for Future Program 

Years 

F. Proposed Reconsideration and Appeals Process 

G. Proposed Policy for Granting of a Waiver of the IRF QRP Data Submission 

Requirements in Case of Disaster or Extraordinary Circumstances 

H. Public Display of Data Quality Measures for the IRF QRP Program 

I. Method for Applying the Reduction to the FY 2014 IRF Increase Factor for IRFs that 

Fail to Meet the Quality Reporting Requirements 

XIV. Collection of Information Requirements 

A.. ICRs Regarding IRF QRP 

B. ICRs Regarding Non-Quality Related Proposed Changes to the IRF-PAI 

XV. Response to Public Comments 

XVI. Regulatory Impact Analysis 

 A. Statement of Need 

B. Overall Impacts 

C. Detailed Economic Analysis 

D. Alternatives Considered 
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E. Accounting Statement 

F. Conclusion 

Regulation Text 

 I. Background 

A. Historical Overview of the Inpatient Rehabilitation Facility Prospective Payment System 

(IRF PPS) 

Section 1886(j) of the Act provides for the implementation of a per discharge prospective 

payment system (PPS) for inpatient rehabilitation hospitals and inpatient rehabilitation units of a 

hospital (hereinafter referred to as IRFs). 

Payments under the IRF PPS encompass inpatient operating and capital costs of 

furnishing covered rehabilitation services (that is, routine, ancillary, and capital costs) but not 

direct graduate medical education costs, costs of approved nursing and allied health education 

activities, bad debts, and other services or items outside the scope of the IRF PPS. Although a 

complete discussion of the IRF PPS provisions appears in the original FY 2002 IRF PPS final 

rule (66 FR 41316) and the FY 2006 IRF PPS final rule (70 FR 47880), we are providing below 

a general description of the IRF PPS for fiscal years (FYs) 2002 through 2013. 

Under the IRF PPS from FY 2002 through FY 2005, as described in the FY 2002 IRF 

PPS final rule (66 FR 41316), the federal prospective payment rates were computed across 

100 distinct case-mix groups (CMGs). We constructed 95 CMGs using rehabilitation 

impairment categories (RICs), functional status (both motor and cognitive), and age (in some 

cases, cognitive status and age may not be a factor in defining a CMG). In addition, we 

constructed five special CMGs to account for very short stays and for patients who expire in the 

IRF. 
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 For each of the CMGs, we developed relative weighting factors to account for a patient's 

clinical characteristics and expected resource needs. Thus, the weighting factors accounted for 

the relative difference in resource use across all CMGs. Within each CMG, we created tiers 

based on the estimated effects that certain comorbidities would have on resource use. 

 We established the federal PPS rates using a standardized payment conversion factor 

(formerly referred to as the budget neutral conversion factor). For a detailed discussion of the 

budget neutral conversion factor, please refer to our FY 2004 IRF PPS final rule 

(68 FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 47880), we discussed 

in detail the methodology for determining the standard payment conversion factor. 

 We applied the relative weighting factors to the standard payment conversion factor to 

compute the unadjusted federal prospective payment rates under the IRF PPS from FYs 2002 

through 2005. Within the structure of the payment system, we then made adjustments to account 

for interrupted stays, transfers, short stays, and deaths. Finally, we applied the applicable 

adjustments to account for geographic variations in wages (wage index), the percentage of lowincome patients, location in a rural area (if applicable), and outlier payments (if applicable) to the 

IRF's unadjusted Federal prospective payment rates. 

 For cost reporting periods that began on or after January 1, 2002 and before 

October 1, 2002, we determined the final prospective payment amounts using the transition 

methodology prescribed in section 1886(j)(1) of the Act. Under this provision, IRFs 

transitioning into the PPS were paid a blend of the Federal IRF PPS rate and the payment that the 

IRF would have received had the IRF PPS not been implemented. This provision also allowed 

IRFs to elect to bypass this blended payment and immediately be paid 100 percent of the federal 

IRF PPS rate. The transition methodology expired as of cost reporting periods beginning on or 
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after October 1, 2002 (FY 2003), and payments for all IRFs now consist of 100 percent of the 

federal IRF PPS rate. 

 We established a CMS website as a primary information resource for the IRF PPS. The 

website is: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/index.html?redirect=/InpatientRehabFacPPS/ and may be 

accessed to download or view publications, software, data specifications, educational materials, 

and other information pertinent to the IRF PPS. 

Section 1886(j) of the Act confers broad statutory authority upon the Secretary to propose 

refinements to the IRF PPS. In the FY 2006 IRF PPS final rule (70 FR 47880) and in correcting 

amendments to the FY 2006 IRF PPS final rule (70 FR 57166) that we published on 

September 30, 2005, we finalized a number of refinements to the IRF PPS case-mix 

classification system (the CMGs and the corresponding relative weights) and the case-level and 

facility-level adjustments. These refinements included the adoption of the Office of 

Management and Budget’s (OMB) Core-Based Statistical Area (CBSA) market definitions, 

modifications to the CMGs, tier comorbidities, and CMG relative weights, implementation of a 

new teaching status adjustment for IRFs, revision and rebasing of the market basket index used 

to update IRF payments, and updates to the rural, low-income percentage (LIP), and high-cost 

outlier adjustments. Beginning with the FY 2006 IRF PPS final rule (70 FR 47908 through 

47917), the market basket index used to update IRF payments is a market basket reflecting the 

operating and capital cost structures for freestanding IRFs, freestanding inpatient psychiatric 

facilities (IPFs), and long-term care hospitals (LTCHs) (hereafter referred to as the rehabilitation, 

psychiatric, and long-term care (RPL) market basket). Any reference to the FY 2006 IRF PPS 

final rule in this proposed rule also includes the provisions effective in the correcting 
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amendments. For a detailed discussion of the final key policy changes for FY 2006, please refer 

to the FY 2006 IRF PPS final rule (70 FR 47880 and 70 FR 57166). 

 In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined the IRF PPS casemix classification system (the CMG relative weights) and the case-level adjustments, to ensure 

that IRF PPS payments would continue to reflect as accurately as possible the costs of care. For 

a detailed discussion of the FY 2007 policy revisions, please refer to the FY 2007 IRF PPS final 

rule (71 FR 48354). 

 In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the federal prospective 

payment rates and the outlier threshold, revised the IRF wage index policy, and clarified how we 

determine high-cost outlier payments for transfer cases. For more information on the policy 

changes implemented for FY 2008, please refer to the FY 2008 IRF PPS final rule 

(72 FR 44284), in which we published the final FY 2008 IRF federal prospective payment rates. 

 After publication of the FY 2008 IRF PPS final rule (72 FR 44284), section 115 of the 

Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173, enacted on 

December 29, 2007) (MMSEA), amended section 1886(j)(3)(C) of the Act to apply a zero 

percent increase factor for FYs 2008 and 2009, effective for IRF discharges occurring on or after 

April 1, 2008. Section 1886(j)(3)(C) of the Act required the Secretary to develop an increase 

factor to update the IRF federal prospective payment rates for each FY. Based on the legislative 

change to the increase factor, we revised the FY 2008 federal prospective payment rates for IRF 

discharges occurring on or after April 1, 2008. Thus, the final FY 2008 IRF Federal prospective 

payment rates that were published in the FY 2008 IRF PPS final rule (72 FR 44284) were 

effective for discharges occurring on or after October 1, 2007 and on or before March 31, 2008; 

and the revised FY 2008 IRF Federal prospective payment rates were effective for discharges 
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occurring on or after April 1, 2008 and on or before September 30, 2008. The revised FY 2008 

federal prospective payment rates are available on the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html. 

 In the FY 2009 IRF PPS final rule (73 FR 46370), we updated the CMG relative weights, 

the average length of stay values, and the outlier threshold; clarified IRF wage index policies 

regarding the treatment of “New England deemed” counties and multi-campus hospitals; and 

revised the regulation text in response to section 115 of the MMSEA to set the IRF compliance 

percentage at 60 percent (“the 60 percent rule”) and continue the practice of including 

comorbidities in the calculation of compliance percentages. We also applied a zero percent 

market basket increase factor for FY 2009 in accordance with section 115 of the MMSEA. For 

more information on the policy changes implemented for FY 2009, please refer to the FY 2009 

IRF PPS final rule (73 FR 46370), in which we published the final FY 2009 IRF federal 

prospective payment rates. 

In the FY 2010 IRF PPS final rule (74 FR 39762) and in correcting amendments to the 

FY 2010 IRF PPS final rule (74 FR 50712) that we published on October 1, 2009, we updated 

the federal prospective payment rates, the CMG relative weights, the average length of stay 

values, the rural, LIP, and teaching status adjustment factors, and the outlier threshold; 

implemented new IRF coverage requirements for determining whether an IRF claim is 

reasonable and necessary; and revised the regulation text to require IRFs to submit patient 

assessments on Medicare Advantage (MA) (Medicare Part C) patients for use in the 60 percent 

rule calculations. Any reference to the FY 2010 IRF PPS final rule in this proposed rule also 

includes the provisions effective in the correcting amendments. For more information on the 
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policy changes implemented for FY 2010, please refer to the FY 2010 IRF PPS final rule 

(74 FR 39762 and 74 FR 50712), in which we published the final FY 2010 IRF federal 

prospective payment rates. 

After publication of the FY 2010 IRF PPS final rule (74 FR 39762), section 3401(d) of 

the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010) as 

amended by section 10319 of the same Act and by section 1105 of the Health Care and 

Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010) 

(collectively, hereafter referred to as “The Affordable Care Act”), amended section 1886(j)(3)(C) 

of the Act and added section 1886(j)(3)(D) of the Act. Section 1886(j)(3)(C) of the Act requires 

the Secretary to estimate a multi-factor productivity adjustment to the market basket increase 

factor, and to apply other adjustments as defined by the Act. The productivity adjustment 

applies to FYs from 2012 forward. The other adjustments apply to FYs 2010 to 2019. 

Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(i) of the Act defined the adjustments that 

were to be applied to the market basket increase factors in FYs 2010 and 2011. Under these 

provisions, the Secretary was required to reduce the market basket increase factor in FY 2010 by 

a 0.25 percentage point adjustment. Notwithstanding this provision, in accordance with 

section 3401(p) of the Affordable Care Act, the adjusted FY 2010 rate was only to be applied to 

discharges occurring on or after April 1, 2010. Based on the self-implementing legislative 

changes to section 1886(j)(3) of the Act, we adjusted the FY 2010 Federal prospective payment 

rates as required, and applied these rates to IRF discharges occurring on or after April 1, 2010 

and on or before September 30, 2010. Thus, the final FY 2010 IRF federal prospective payment 

rates that were published in the FY 2010 IRF PPS final rule (74 FR 39762) were used for 

discharges occurring on or after October 1, 2009 and on or before March 31, 2010; and the 
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adjusted FY 2010 IRF federal prospective payment rates applied to discharges occurring on or 

after April 1, 2010 and on or before September 30, 2010. The adjusted FY 2010 federal 

prospective payment rates are available on the CMS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/DataFiles.html. 

In addition, sections 1886(j)(3)(C) and (D) of the Act also affected the FY 2010 IRF 

outlier threshold amount because they required an adjustment to the FY 2010 RPL market basket 

increase factor, which changed the standard payment conversion factor for FY 2010. 

Specifically, the original FY 2010 IRF outlier threshold amount was determined based on the 

original estimated FY 2010 RPL market basket increase factor of 2.5 percent and the standard 

payment conversion factor of $13,661. However, as adjusted, the IRF prospective payments are 

based on the adjusted RPL market basket increase factor of 2.25 percent and the revised standard 

payment conversion factor of $13,627. To maintain estimated outlier payments for FY 2010 

equal to the established standard of 3 percent of total estimated IRF PPS payments for FY 2010, 

we revised the IRF outlier threshold amount for FY 2010 for discharges occurring on or after 

April 1, 2010 and on or before September 30, 2010. The revised IRF outlier threshold amount 

for FY 2010 was $10,721. 

Sections 1886(j)(3)(c)(ii)(II) and 1886(j)(3)(D)(i) also required the Secretary to reduce 

the market basket increase factor in FY 2011 by a 0.25 percentage point adjustment. The 

FY 2011 IRF PPS notice (75 FR 42836) and the correcting amendments to the FY 2011 IRF PPS 

notice (75 FR 70013, November 16, 2010) described the required adjustments to the FY 2011 

and FY 2010 IRF PPS Federal prospective payment rates and outlier threshold amount for IRF 

discharges occurring on or after April 1, 2010 and on or before September 30, 2011. It also 
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updated the FY 2011 Federal prospective payment rates, the CMG relative weights, and the 

average length of stay values. Any reference to the FY 2011 IRF PPS notice in this proposed 

rule also includes the provisions effective in the correcting amendments. For more information 

on the FY 2010 and FY 2011 adjustments or the updates for FY 2011, please refer to the 

FY 2011 IRF PPS notice (75 FR 42836 and 75 FR 70013). 

In the FY 2012 IRF PPS final rule (76 FR 47836), we updated the IRF federal 

prospective payment rates, rebased and revised the RPL market basket, and established a new 

quality reporting program for IRFs in accordance with section 1886(j)(7) of the Act. We also 

revised regulations text for the purpose of updating and providing greater clarity. For more 

information on the policy changes implemented for FY 2012, please refer to the FY 2012 IRF 

PPS final rule (76 FR 47836), in which we published the final FY 2012 IRF federal prospective 

payment rates. 

The FY 2013 IRF PPS notice (77 FR 44618) described the required adjustments to the 

FY 2013 federal prospective payment rates and outlier threshold amount for IRF discharges 

occurring on or after October 1, 2012 and on or before September 30, 2013. It also updated the 

FY 2013 federal prospective payment rates, the CMG relative weights, and the average length of 

stay values. For more information on the updates for FY 2013, please refer to the FY 2013 IRF 

PPS notice (77 FR 44618). 

B. Provisions of the Affordable Care Act Affecting the IRF PPS in FY 2012 and Beyond

 The Affordable Care Act included several provisions that affect the IRF PPS in FYs 2012 

and beyond. In addition to what was discussed above, section 3401(d) of the Affordable Care 

Act also added section 1886(j)(3)(C)(ii)(I) (providing for a “productivity” adjustment” for fiscal 

year 2012 and each subsequent fiscal year). The proposed productivity adjustment for FY 2014 
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is discussed in section V.A. of this proposed rule. Section 3401(d) of the Affordable Care Act 

requires an additional 0.3 percentage point adjustment to the IRF increase factor for FY 2014, as 

discussed in section V.A. of this proposed rule. Section 1886(j)(3)(C)(ii)(II) of the Act notes that 

the application of these adjustments to the market basket update may result in an update that is 

less than 0.0 for a fiscal year and in payment rates for a fiscal year being less than such payment 

rates for the preceding fiscal year. 

 Section 3004(b) of the Affordable Care Act also addressed the IRF PPS program. It 

reassigned the previously-designated section 1886(j)(7) of the Act to section 1886(j)(8) and 

inserted a new section 1886(j)(7), which contains new requirements for the Secretary to establish 

a quality reporting program for IRFs. Under that program, data must be submitted in a form and 

manner, and at a time specified by the Secretary. Beginning in FY 2014, section 1886(j)(7)(A)(i) 

will require application of a 2 percentage point reduction of the applicable market basket 

increase factor for IRFs that fail to comply with the quality data submission requirements. 

Application of the 2 percentage point reduction may result in an update that is less than 0.0 for a 

fiscal year and in payment rates for a fiscal year being less than such payment rates for the 

preceding fiscal year. Reporting-based reductions to the market basket increase factor will not 

be cumulative; they will only apply for the FY involved. 

 Under section 1886(j)(7)(D)(i) and (ii) of the Act, the Secretary is generally required to 

select quality measures for the IRF quality reporting program from those that have been endorsed 

by the consensus-based entity which holds a performance measurement contract under section 

1890(a) of the Act. This contract is currently held by the National Quality Forum (NQF). So 

long as due consideration is given to measures that have been endorsed or adopted by a 

consensus-based organization, section 1886(j)(7)(D)(ii) of the Act authorizes the Secretary to 
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select non-endorsed measures for specified areas or medical topics when there are no feasible or 

practical endorsed measure(s). Under section 1886(j)(7)(D)(iii) of the Act, the Secretary is 

required to publish the measures that will be used in FY 2014 no later than October 1, 2012. 

 Section 1886(j)(7)(E) of the Act requires the Secretary to establish procedures for making 

the IRF PPS quality reporting data available to the public. In so doing, the Secretary must ensure 

that IRFs have the opportunity to review any such data prior to its release to the public. Future 

rulemaking will address these public reporting obligations. 

C. Operational Overview of the Current IRF PPS 

 As described in the FY 2002 IRF PPS final rule, upon the admission and discharge of a 

Medicare Part A fee-for-service patient, the IRF is required to complete the appropriate sections 

of a patient assessment instrument (PAI), designated as the Inpatient Rehabilitation FacilityPatient Assessment Instrument (IRF-PAI). In addition, beginning with IRF discharges occurring 

on or after October 1, 2009, the IRF is also required to complete the appropriate sections of the 

IRF-PAI upon the admission and discharge of each Medicare Part C (Medicare Advantage) 

patient, as described in the FY 2010 IRF PPS final rule. All required data must be electronically 

encoded into the IRF-PAI software product. Generally, the software product includes patient 

classification programming called the GROUPER software. The GROUPER software uses 

specific IRF-PAI data elements to classify (or group) patients into distinct CMGs and account for 

the existence of any relevant comorbidities. 

 The GROUPER software produces a 5-digit CMG number. The first digit is an alphacharacter that indicates the comorbidity tier. The last 4 digits represent the distinct CMG number. 

Free downloads of the Inpatient Rehabilitation Validation and Entry (IRVEN) software product, 

including the GROUPER software, are available on the CMS website at 
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http://www.cms.hhs.gov/Medicare/Medicare-Fee-for -ServicePayment/InpatientRehabFacPPS/Software.html. 

 Once a Medicare fee-for-service Part A patient is discharged, the IRF submits a Medicare 

claim as a Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191, 

enacted on August 21, 1996) (HIPAA), compliant electronic claim or, if the Administrative 

Simplification Compliance Act of 2002 (Pub. L. 107-105, enacted on December 27, 2002) 

(ASCA) permits, a paper claim (a UB-04 or a CMS-1450 as appropriate) using the five-digit 

CMG number and sends it to the appropriate Medicare fiscal intermediary (FI) or Medicare 

Administrative Contractor (MAC). In addition, once a Medicare Advantage patient is 

discharged, in accordance with the Medicare Claims Processing Manual chapter 3 section 20.3 

(Pub. 100-04), hospitals (including IRFs) must submit an informational only bill (TOB 111) 

which includes Condition Code 04 to their Medicare contractor. This will ensure that the 

Medicare Advantage days are included in the hospital’s Supplemental Security Income (SSI) 

ratio (used in calculating the IRF low-income percentage adjustment) for Fiscal Year 2007 and 

beyond. Claims submitted to Medicare must comply with both ASCA and HIPAA. 

 Section 3 of the ASCA amends section 1862(a) of the Act by adding paragraph (22) 

which requires the Medicare program, subject to section 1862(h) of the Act, to deny payment 

under Part A or Part B for any expenses for items or services “for which a claim is submitted 

other than in an electronic form specified by the Secretary.” Section 1862(h) of the Act, in turn, 

provides that the Secretary shall waive such denial in situations in which there is no method 

available for the submission of claims in an electronic form or the entity submitting the claim is a 

small provider. In addition, the Secretary also has the authority to waive such denial “in such 

unusual cases as the Secretary finds appropriate.” For more information, see the “Medicare 
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Program; Electronic Submission of Medicare Claims” final rule (70 FR 71008, 

November 25, 2005). CMS instructions for the limited number of Medicare claims submitted on 

paper are available at http://www.cms.gov/manuals/downloads/clm104c25.pdf. 

 Section 3 of the ASCA operates in the context of the administrative simplification 

provisions of HIPAA, which include, among others, the requirements for transaction standards 

and code sets codified in 45 CFR, parts 160 and 162, subparts A and I through R (generally 

known as the Transactions Rule). The Transactions Rule requires covered entities, including 

covered healthcare providers, to conduct covered electronic transactions according to the 

applicable transaction standards. (See the CMS program claim memoranda at 

http://www.cms.gov/ElectronicBillingEDITrans/ and listed in the addenda to the Medicare 

Intermediary Manual, Part 3, section 3600). 

The Medicare FI or MAC processes the claim through its software system. This software 

system includes pricing programming called the “PRICER” software. The PRICER software 

uses the CMG number, along with other specific claim data elements and provider-specific data, 

to adjust the IRF's prospective payment for interrupted stays, transfers, short stays, and deaths, 

and then applies the applicable adjustments to account for the IRF's wage index, percentage of 

low-income patients, rural location, and outlier payments. For discharges occurring on or after 

October 1, 2005, the IRF PPS payment also reflects the teaching status adjustment that became 

effective as of FY 2006, as discussed in the FY 2006 IRF PPS final rule (70 FR 47880). 

II. Summary of Provisions of the Proposed Rule 

In this proposed rule, we are proposing to update the IRF Federal prospective payment 

rates, to revise the list of eligible International Classification of Diseases, Ninth Revision, 

Clinical Modification (ICD-9-CM) diagnosis codes that are eligible under the “60 percent rule,” 
 21

to update the IRF facility-level adjustment factors, to revise the Inpatient Rehabilitation FacilityPatient Assessment Instrument (IRF-PAI), to revise requirements for acute care hospitals that 

have IRF units, clarify the IRF regulation text regarding limitation of review, and to revise and 

update quality measures and reporting requirements under the quality reporting program for 

IRFs. We are also proposing to revise existing regulations text for the purpose of updating and 

providing greater clarity. These proposals are as follows: 

A. Proposed Updates to the IRF Federal Prospective Payment Rates for Federal Fiscal Year 

(FY) 2014

The proposed updates to the IRF federal prospective payment rates for FY 2014 are as 

follows: 

● Update the FY 2014 IRF PPS relative weights and average length of stay values using 

the most current and complete Medicare claims and cost report data in a budget neutral manner, 

as discussed in section III. of this proposed rule. 

● Update the FY 2014 IRF PPS facility-level adjustment factors, using the most current 

and complete Medicare claims and cost report data with an enhanced estimation methodology, in 

a budget neutral manner, as discussed in section IV. of this proposed rule. 

● Update the FY 2014 IRF PPS payment rates by the proposed market basket increase 

factor, based upon the most current data available, with a 0.3 percentage point reduction as 

required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iii) of the Act and a proposed 

productivity adjustment required by section 1886(j)(3)(C)(ii)(I) of the Act, as described in 

section V. of this proposed rule. 

● Discuss the Secretary’s Proposed Recommendation for updating IRF PPS payments 

for FY 2014, in accordance with the statutory requirements, as described in section V. of this 
 22

proposed rule. 

● Update the FY 2014 IRF PPS payment rates by the FY 2014 wage index and the laborrelated share in a budget neutral manner, as discussed in section V. of this proposed rule. 

● Describe the calculation of the IRF Standard Payment Conversion Factor for FY 2014, 

as discussed in section V. of this proposed rule. 

● Update the outlier threshold amount for FY 2014, as discussed in section VI. of this 

proposed rule. 

● Update the cost-to-charge ratio (CCR) ceiling and urban/rural average CCRs for 

FY 2014, as discussed in section VI. of this proposed rule. 

● Describe proposed revisions to the list of eligible ICD-9-CM diagnosis codes that meet 

the presumptive compliance criteria in section VII. of this proposed rule. 

● Describe proposed non-quality-related revisions to IRF-PAI sections in section VIII. 

of this proposed rule. 

● Describe proposed revisions and updates to quality measures and reporting 

requirements under the quality reporting program for IRFs in accordance with section 1886(j)(7) 

of the Act, as discussed in section XIII. of this proposed rule. 

B. Proposed Revisions to Existing Regulation Text

In this proposed rule, we are also proposing the following revisions to the existing 

regulations: 

● Revisions to §412.25(a)(1)(iii) to specify a minimum required number of beds that are 

not excluded from the inpatient prospective payment system (IPPS) for a hospital that has an IRF 

unit, as described in section X. of this proposed rule. 

● Technical corrections to §412.130, to reflect prior changes to the regulations at 
 23

§412.29 and §412.30 that we made in the FY 2012 IRF PPS final rule (76 FR 47836), as 

described in section IX. of this proposed rule. 

● Clarifications to §412.630, to reflect the scope of section 1886(j)(8) of the Act, as 

described in section XI. of this proposed rule. 

● Revision to §412.29(d), to clarify that Medicare requires the rehabilitation physician’s 

review and concurrence on the preadmission screening for Medicare Part A fee-for-service 

patients only, as described in section XII. of this proposed rule. 

III. Proposed Update to the Case-Mix Group (CMG) Relative Weights and Average 

Length of Stay Values for FY 2014 

 As specified in §412.620(b)(1), we calculate a relative weight for each CMG that is 

proportional to the resources needed by an average inpatient rehabilitation case in that CMG. 

For example, cases in a CMG with a relative weight of 2, on average, will cost twice as much as 

cases in a CMG with a relative weight of 1. Relative weights account for the variance in cost per 

discharge due to the variance in resource utilization among the payment groups, and their use 

helps to ensure that IRF PPS payments support beneficiary access to care, as well as provider 

efficiency. 

 In this proposed rule, we propose to update the CMG relative weights and average length 

of stay values for FY 2014. As required by statute, we always use the most recent available data 

to update the CMG relative weights and average lengths of stay. For FY 2014, we are proposing 

to use the FY 2012 IRF claims and FY 2011 IRF cost report data. These data are the most 

current and complete data available at this time. Currently, only a small portion of the FY 2012 

IRF cost report data are available for analysis, but the majority of the FY 2012 IRF claims data 

are available for analysis. 
 24

 In this proposed rule, we propose to apply these data using the same methodologies that 

we have used to update the CMG relative weights and average length of stay values in the 

FY 2011 notice (75 FR 42836), the FY 2012 final rule (76 FR 47836), and the FY 2013 notice 

(77 FR 44618). In calculating the CMG relative weights, we use a hospital-specific relative 

value method to estimate operating (routine and ancillary services) and capital costs of IRFs. 

The process used to calculate the CMG relative weights for this proposed rule is as follows: 

 Step 1. We estimate the effects that comorbidities have on costs. 

 Step 2. We adjust the cost of each Medicare discharge (case) to reflect the effects found 

in the first step. 

 Step 3. We use the adjusted costs from the second step to calculate CMG relative 

weights, using the hospital-specific relative value method. 

 Step 4. We normalize the FY 2014 CMG relative weights to the same average CMG 

relative weight from the CMG relative weights implemented in the FY 2013 IRF PPS notice 

(77 FR 44618). 

 Consistent with the methodology that we have used to update the IRF classification 

system in each instance in the past, we are proposing to update the CMG relative weights for 

FY 2014 in such a way that total estimated aggregate payments to IRFs for FY 2014 are the same 

with or without the changes (that is, in a budget neutral manner) by applying a budget neutrality 

factor to the standard payment amount. To calculate the appropriate proposed budget neutrality 

factor for use in updating the FY 2014 CMG relative weights, we propose to use the following 

steps: 

 Step 1. Calculate the estimated total amount of IRF PPS payments for FY 2014 (with no 

proposed changes to the CMG relative weights). 
 25

 Step 2. Calculate the estimated total amount of IRF PPS payments for FY 2014 by 

applying the proposed changes to the CMG relative weights (as discussed above). 

 Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2 to 

determine the proposed budget neutrality factor (1.0000) that would maintain the same total 

estimated aggregate payments in FY 2014 with and without the proposed changes to the CMG 

relative weights. 

 Step 4. Apply the proposed budget neutrality factor (1.0000) to the FY 2013 IRF PPS 

standard payment amount after the application of the budget-neutral wage adjustment factor. 

 In section V.E. of this proposed rule, we discuss the proposed use of the existing 

methodology to calculate the standard payment conversion factor for FY 2014. 

 Table 1, “Proposed Relative Weights and Average Length of Stay Values for Case-Mix 

Groups,” presents the CMGs, the comorbidity tiers, the proposed corresponding relative weights, 

and the proposed average length of stay values for each CMG and tier for FY 2014. The average 

length of stay for each CMG is used to determine when an IRF discharge meets the definition of 

a short-stay transfer, which results in a per diem case level adjustment. The proposed relative 

weights and average length of stay values shown in Table 1 are subject to change for the final 

rule if more recent data become available for use in these analyses. 
 26

TABLE 1: Proposed Relative Weights and Average Length of Stay Values for Case-Mix 

Groups 

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0101 Stroke 

M>51.05 0.8001 0.7122 0.6556 0.6248 9 9 9 8

0102 Stroke 

M>44.45 and 

M<51.05 and 

C>18.5 0.9921 0.8831 0.8129 0.7748 11 12 10 10

0103 Stroke 

M>44.45 and 

M<51.05 and 

C<18.5 1.1613 1.0337 0.9516 0.9069 13 13 12 11

0104 Stroke 

M>38.85 and 

M<44.45 1.2210 1.0869 1.0006 0.9536 14 12 12 12

0105 Stroke 

M>34.25 and 

M<38.85 1.4283 1.2715 1.1704 1.1154 15 14 14 14

0106 Stroke 

M>30.05 and 

M<34.25 1.6327 1.4534 1.3379 1.2751 16 17 16 15

0107 Stroke 

M>26.15 and 

M<30.05 1.8413 1.6391 1.5088 1.4380 19 20 17 17

0108 Stroke 

M<26.15 and 

A>84.5 2.3160 2.0616 1.8978 1.8087 23 24 22 21

0109 Stroke 

M>22.35 and 

M<26.15 and 

A<84.5 2.1034 1.8724 1.7236 1.6426 21 21 19 20

0110 Stroke 

M<22.35 and 

A<84.5 2.7387 2.4380 2.2443 2.1388 28 28 25 25

0201 Traumatic 

brain injury 

M>53.35 and 

C>23.5 0.8068 0.6835 0.6059 0.5641 10 10 8 8

0202 Traumatic 

brain injury 

M>44.25 and 

M<53.35 and 

C>23.5 1.0536 0.8926 0.7912 0.7366 12 10 10 10

0203 Traumatic 

brain injury 

M>44.25 and 

C<23.5 1.2422 1.0524 0.9329 0.8685 14 13 12 11
 27

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0204 Traumatic 

brain injury 

M>40.65 and 

M<44.25 1.3000 1.1013 0.9762 0.9089 12 13 12 12

0205 Traumatic 

brain injury 

M>28.75 and 

M<40.65 1.5755 1.3347 1.1831 1.1015 17 16 14 14

0206 Traumatic 

brain injury 

M>22.05 and 

M<28.75 1.9459 1.6485 1.4613 1.3605 18 19 17 16

0207 Traumatic 

brain injury 

M<22.05 2.5684 2.1759 1.9287 1.7957 33 26 21 20

0301 Nontraumatic 

brain injury 

M>41.05 1.0992 0.9462 0.8502 0.7859 10 11 11 10

0302 Nontraumatic 

brain injury 

M>35.05 and 

M<41.05 1.3735 1.1824 1.0625 0.9820 13 14 12 12

0303 Nontraumatic 

brain injury 

M>26.15 and 

M<35.05 1.6221 1.3964 1.2548 1.1597 16 16 14 14

0304 Nontraumatic 

brain injury 

M<26.15 2.1731 1.8708 1.6810 1.5537 24 21 19 18

0401 Traumatic 

spinal cord 

injury 

M>48.45 1.1451 0.9494 0.8847 0.7923 13 13 11 10

0402 Traumatic 

spinal cord 

injury 

M>30.35 and 

M<48.45 1.4139 1.1724 1.0924 0.9784 17 14 14 12

0403 Traumatic 

spinal cord 

injury 

M>16.05 and 

M<30.35 2.3069 1.9128 1.7823 1.5963 26 23 20 20
 28

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0404 Traumatic 

spinal cord 

injury 

M<16.05 and 

A>63.5 4.2117 3.4921 3.2539 2.9142 46 41 35 34

0405 Traumatic 

spinal cord 

injury 

M<16.05 and 

A<63.5 3.4483 2.8592 2.6642 2.3861 37 32 31 27

0501 Nontraumatic 

spinal cord 

injury 

M>51.35 0.8500 0.6729 0.6328 0.5761 9 9 8 8

0502 Nontraumatic 

spinal cord 

injury 

M>40.15 and 

M<51.35 1.1064 0.8759 0.8237 0.7500 12 11 10 10

0503 Nontraumatic 

spinal cord 

injury 

M>31.25 and 

M<40.15 1.4276 1.1302 1.0628 0.9677 15 13 13 12

0504 Nontraumatic 

spinal cord 

injury 

M>29.25 and 

M<31.25 1.6534 1.3089 1.2309 1.1207 14 16 14 14

0505 Nontraumatic 

spinal cord 

injury 

M>23.75 and 

M<29.25 1.9495 1.5433 1.4514 1.3214 21 18 17 16

0506 Nontraumatic 

spinal cord 

injury 

M<23.75 2.7308 2.1619 2.0330 1.8510 30 25 23 21

0601 Neurological 

M>47.75 0.9661 0.7875 0.7272 0.6589 10 10 9 9

0602 Neurological 

M>37.35 and 

M<47.75 1.2904 1.0518 0.9713 0.8801 12 12 11 11
 29

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0603 Neurological 

M>25.85 and 

M<37.35 1.6184 1.3191 1.2182 1.1038 15 15 14 13

0604 Neurological 

M<25.85 2.1563 1.7575 1.6231 1.4706 22 19 18 17

0701 Fracture of 

lower 

extremity 

M>42.15 0.9445 0.8052 0.7712 0.6996 10 10 10 9

0702 Fracture of 

lower 

extremity 

M>34.15 and 

M<42.15 1.2149 1.0357 0.9920 0.8999 12 12 12 11

0703 Fracture of 

lower 

extremity 

M>28.15 and 

M<34.15 1.4770 1.2591 1.2060 1.0940 15 15 14 13

0704 Fracture of 

lower 

extremity 

M<28.15 1.8753 1.5987 1.5312 1.3891 18 18 18 17

0801 Replacement 

of lower 

extremity 

joint 

M>49.55 0.7009 0.6238 0.5675 0.5200 7 8 7 7

0802 Replacement 

of lower 

extremity 

joint 

M>37.05 and 

M<49.55 0.9206 0.8193 0.7453 0.6830 10 10 9 9

0803 Replacement 

of lower 

extremity 

joint 

M>28.65 and 

M<37.05 and 

A>83.5 1.2478 1.1105 1.0103 0.9257 12 13 13 12

0804 Replacement 

of lower 

extremity 

joint 

M>28.65 and 

M<37.05 and 

A<83.5 1.1083 0.9863 0.8973 0.8222 11 12 11 10
 30

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

0805 Replacement 

of lower 

extremity 

joint 

M>22.05 and 

M<28.65 1.3678 1.2173 1.1075 1.0148 15 15 13 12

0806 Replacement 

of lower 

extremity 

joint 

M<22.05 1.6590 1.4765 1.3433 1.2308 17 17 15 15

0901 Other 

orthopedic 

M>44.75 0.9026 0.7480 0.6895 0.6254 11 9 9 8

0902 Other 

orthopedic 

M>34.35 and 

M<44.75 1.2051 0.9987 0.9206 0.8350 12 12 11 11

0903 Other 

orthopedic 

M>24.15 and 

M<34.35 1.5094 1.2509 1.1530 1.0459 15 15 14 13

0904 Other 

orthopedic 

M<24.15 1.9660 1.6293 1.5019 1.3623 19 18 17 16

1001 Amputation, 

lower 

extremity 

M>47.65 1.0372 0.9443 0.8131 0.7478 12 11 10 10

1002 Amputation, 

lower 

extremity 

M>36.25 and 

M<47.65 1.3081 1.1909 1.0255 0.9431 13 13 12 12

1003 Amputation, 

lower 

extremity 

M<36.25 1.9330 1.7599 1.5154 1.3936 19 20 17 16

1101 Amputation, 

non-lower 

extremity 

M>36.35 1.2388 1.1334 1.0487 1.0147 13 13 12 12

1102 Amputation, 

non-lower 

extremity 

M<36.35 1.7069 1.5618 1.4450 1.3981 16 17 16 16

1201 Osteoarthritis 

M>37.65 0.9482 0.9350 0.8467 0.7752 9 11 10 10
 31

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

1202 Osteoarthritis 

M>30.75 and 

M<37.65 1.1813 1.1649 1.0549 0.9659 14 14 13 12

1203 Osteoarthritis 

M<30.75 1.4671 1.4468 1.3101 1.1995 13 17 15 14

1301 Rheumatoid, 

other arthritis 

M>36.35 1.1815 0.9991 0.9005 0.8171 12 10 11 10

1302 Rheumatoid, 

other arthritis 

M>26.15 and 

M<36.35 1.5305 1.2942 1.1666 1.0585 16 15 14 13

1303 Rheumatoid, 

other arthritis 

M<26.15 1.9677 1.6639 1.4998 1.3608 18 19 17 16

1401 Cardiac 

M>48.85 0.8864 0.7216 0.6539 0.5919 9 9 9 8

1402 Cardiac 

M>38.55 and 

M<48.85 1.1973 0.9747 0.8832 0.7995 12 11 11 10

1403 Cardiac 

M>31.15 and 

M<38.55 1.4604 1.1889 1.0773 0.9752 14 14 12 12

1404 Cardiac 

M<31.15 1.8618 1.5157 1.3734 1.2433 19 17 15 14

1501 Pulmonary 

M>49.25 1.0003 0.8590 0.7747 0.7436 10 9 9 9

1502 Pulmonary 

M>39.05 and 

M<49.25 1.2590 1.0812 0.9751 0.9359 12 12 11 11

1503 Pulmonary 

M>29.15 and 

M<39.05 1.5224 1.3074 1.1791 1.1318 15 14 13 13

1504 Pulmonary 

M<29.15 1.8896 1.6227 1.4634 1.4047 21 17 16 15

1601 Pain 

syndrome 

M>37.15 1.0309 0.8817 0.8282 0.7568 9 10 10 9

1602 Pain 

syndrome 

M>26.75 and 

M<37.15 1.3536 1.1577 1.0874 0.9937 12 14 13 12

1603 Pain 

syndrome 

M<26.75 1.7052 1.4584 1.3699 1.2518 18 17 15 15
 32

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

1701 Major 

multiple 

trauma 

without brain 

or spinal cord 

injury 

M>39.25 1.0875 0.9493 0.8541 0.7718 11 12 11 10

1702 Major 

multiple 

trauma 

without brain 

or spinal cord 

injury 

M>31.05 and 

M<39.25 1.3611 1.1881 1.0689 0.9659 13 14 13 12

1703 Major 

multiple 

trauma 

without brain 

or spinal cord 

injury 

M>25.55 and 

M<31.05 1.6427 1.4339 1.2901 1.1658 17 16 14 14

1704 Major 

multiple 

trauma 

without brain 

or spinal cord 

injury 

M<25.55 2.0841 1.8193 1.6368 1.4790 24 20 18 18

1801 Major 

multiple 

trauma with 

brain or spinal 

cord injury 

M>40.85 1.1476 1.0623 0.9340 0.7874 14 13 12 10

1802 Major 

multiple 

trauma with 

brain or spinal 

cord injury 

M>23.05 and 

M<40.85 1.7108 1.5837 1.3924 1.1739 18 19 17 14

1803 Major 

multiple 

trauma with 

brain or spinal 

cord injury 

M<23.05 2.7350 2.5317 2.2259 1.8766 32 28 23 22
 33

CMG CMG 

Description 

(M=motor, 

C=cognitive, 

A=age) 

Relative weight Average length of stay 

 Tier1 Tier2 Tier3 None Tier1 Tier2 Tier3 None 

1901 Guillain Barre 

M>35.95 1.0958 0.9305 0.9064 0.8886 13 10 11 11

1902 Guillain Barre 

M>18.05 and 

M<35.95 2.1340 1.8120 1.7652 1.7305 23 21 18 20

1903 Guillain Barre 

M<18.05 3.5000 2.9719 2.8951 2.8382 41 32 31 30

2001 Miscellaneous 

M>49.15 0.8897 0.7304 0.6716 0.6138 9 9 8 8

2002 Miscellaneous 

M>38.75 and 

M<49.15 1.1865 0.9741 0.8956 0.8186 12 11 11 10

2003 Miscellaneous 

M>27.85 and 

M<38.75 1.4910 1.2241 1.1254 1.0286 14 14 13 12

2004 Miscellaneous 

M<27.85 1.9537 1.6039 1.4746 1.3478 20 18 17 15

2101 Burns 

M>0 2.1782 1.5737 1.4885 1.4056 24 21 17 16

5001 Short-stay 

cases, length 

of stay is 3 

days or fewer 0.1541 3

5101 Expired, 

orthopedic, 

length of stay 

is 13 days or 

fewer 0.6604 8

5102 Expired, 

orthopedic, 

length of stay 

is 14 days or 

more 1.4552 17

5103 Expired, not 

orthopedic, 

length of stay 

is 15 days or 

fewer 0.7653 9

5104 Expired, not 

orthopedic, 

length of stay 

is 16 days or 

more 1.9930 22

 Generally, updates to the CMG relative weights result in some increases and some 

decreases to the CMG relative weight values. Table 2 shows how the application of the 
 34

proposed revisions for FY 2014 would affect particular CMG relative weight values, which 

affect the overall distribution of payments within CMGs and tiers. Note that, because we 

propose to implement the CMG relative weight revisions in a budget neutral manner (as 

described above), total estimated aggregate payments to IRFs for FY 2014 would not be affected 

as a result of the CMG relative weight revisions. However, the proposed revisions would affect 

the distribution of payments within CMGs and tiers. 

TABLE 2: Distributional Effects of the Proposed Changes to the CMG Relative Weights 

(FY 2013 Values Compared With FY 2014 Values) 

Percentage Change Number of 

Cases 

Affected 

Percentage of 

Cases 

Affected 

Increased by 15% or more 0 0.0 

Increased by between 5% and 15% 2,325 0.7 

Changed by less than 5% 340,496 98.7 

Decreased by between 5% and 15% 1,939 0.6 

Decreased by 15% or more 92 0.0 

As Table 2 shows, almost 99 percent of all IRF cases are in CMGs and tiers that would 

experience less than a 5 percent change (either increase or decrease) in the CMG relative weight 

value as a result of the proposed revisions for FY 2014. The largest increase in the proposed 

CMG relative weight values that affects a particularly large number of IRF discharges is a 

0.9 percent increase in the CMG relative weight value for CMG 0704—Fracture of Lower 

Extremity, with a motor score less than 28.15—in the “no comorbidity” tier. In the FY 2012 

data, 18,770 IRF discharges (5.4 percent of all IRF discharges) were classified into this CMG 

and tier. 

The largest decrease in a CMG relative weight value affecting the most cases is a 

2.0 percent decrease in the CMG relative weight for CMG 0903—Other Orthopedic with a motor 

score between 24.15 and 34.35—in the no comorbidity tier. In the FY 2012 IRF claims data, this 
 35

change affects 6,605 cases (1.9 percent of all IRF cases). 

The changes in the average length of stay values for FY 2014, compared with the 

FY 2013 average length of stay values, are small and do not show any particular trends in IRF 

length of stay patterns. 

IV. Proposed Updates to the Facility-Level Adjustment Factors for FY 2014 

A. Background on Facility- Level Adjustments 

 Section 1886(j)(3)(A)(v) of the Act confers broad authority upon the Secretary to adjust 

the per unit payment rate “by such . . . factors as the Secretary determines are necessary to 

properly reflect variations in necessary costs of treatment among rehabilitation facilities.” For 

example, we adjust the federal prospective payment amount associated with a CMG to account 

for facility-level characteristics such as an IRF’s LIP, teaching status, and location in a rural area, 

if applicable, as described in §412.624(e). 

 In the FY 2010 IRF PPS final rule (74 FR 39762), we updated the adjustment factors for 

calculating the rural, LIP, and teaching status adjustments based on the most recent three 

consecutive years’ worth of IRF claims data (at that time, FY 2006, FY 2007, and FY 2008) and 

the most recent available corresponding IRF cost report data. As discussed in the FY 2010 IRF 

PPS proposed rule (74 FR 21060 through 21061), we observed relatively large year-to-year 

fluctuations in the underlying data used to compute the adjustment factors, especially the 

teaching status adjustment factor. Therefore, we implemented a 3-year moving average 

approach to updating the facility-level adjustment factors in the FY 2010 IRF PPS final rule 

(74 FR 39762) to provide greater stability and predictability of Medicare payments for IRFs. 

 Each year, we review the major components of the IRF PPS to maintain and enhance the 

accuracy of the payment system. For FY 2010, we implemented a change to our methodology 
 36

that was designed to decrease the IRF PPS volatility by using a 3-year moving average to 

calculate the facility-level adjustment factors. For FY 2011, we issued a notice to update the 

payment rates, which did not include any policy changes or changes to the IRF facility-level 

adjustments. As we found that the implementation of the 3-year moving average did not fully 

address year-to-year fluctuations, in the FY 2012 IRF PPS proposed rule (76 FR 24214 at 24225 

through 24226) we analyzed the effects of having used a weighting methodology. The 

methodology assigned greater weight to some facilities than to others in the regression analysis 

used to estimate the facility-level adjustment factors. As we found that this weighting 

methodology inappropriately exaggerated the cost differences among different types of IRF 

facilities, we proposed to remove the weighting factor from our analysis and update the IRF 

facility-level adjustment factors for FY 2012 using an un-weighted regression analysis. 

However, after carefully considering all of the comments that we received on the proposed 

FY 2012 updates to the facility-level adjustment factors, we decided to hold the facility-level 

adjustment factors at FY 2011 levels for FY 2012 to conduct further research on the underlying 

data and the best methodology for calculating the facility-level adjustment factors. We based 

this decision, in part, on comments we received about the financial hardships that the proposed 

updates would create for facilities with teaching programs and a higher disproportionate share of 

low-income patients. 

B. Proposed Updates to the IRF Facility-Level Adjustment Factors

 Since the FY 2012 final rule (76 FR 47836), we have conducted further research into the 

best methodology to use to estimate the IRF facility-level adjustment factors, to ensure that the 

adjustment factors reflect as accurately as possible the costs of providing IRF care across the full 

spectrum of IRF providers. Our recent research efforts have shown that significant differences 
 37

exist between the cost structures of freestanding IRFs and the cost structures of IRF units of 

acute care hospitals (and critical access hospitals, otherwise known as “CAHs”). We have found 

that these cost structure differences substantially influence the estimates of the adjustment 

factors. Therefore, we believe that it is important to control for these cost structure differences 

between hospital-based and freestanding IRFs in our regression analysis, so that these 

differences do not inappropriately influence the adjustment factor estimates. In Medicare’s 

payment system for the treatment of end-stage renal disease (ESRD), we already control for the 

cost structure differences between hospital-based and freestanding facilities in the regression 

analyses that are used to set payment rates. Also, we received comments from an IRF industry 

association on the FY 2012 IRF PPS proposed rule suggesting that the addition of this particular 

control variable to the model could improve the methodology for estimating the IRF facilitylevel adjustment factors. 

 Thus, we propose to add an indicator variable to our 3-year moving average methodology 

for updating the IRF facility-level adjustments that would have an assigned value of “1” if the 

facility is a freestanding IRF hospital and have an assigned value of “0” if the facility is an IRF 

unit of an acute care hospital (or CAH). Adding this variable to the regression analysis enables 

us to control for the differences in costs that are primarily due to the differences in cost structures 

between freestanding and hospital-based IRFs, so that those differences do not become 

inappropriately intertwined with our estimates of the differences in costs between rural and urban 

facilities, high LIP percentage and low LIP percentage facilities, and teaching and non-teaching 

facilities. Further, by including this variable in the regression analysis, we greatly improve our 

ability to predict an IRF’s average cost per case (that is, the R-squared of the regression model 

increases from about 11 percent to 41 percent). In this way, it enhances the precision with which 
 38

we can estimate the IRF facility-level adjustments. 

 Therefore, in this proposed rule, we propose to use the same methodology used in the 

FY 2010 IRF PPS final rule (74 FR 39762), including the 3-year moving average approach, with 

the addition of this new control variable, which equals “1” if the facility is a freestanding IRF 

hospital and “0” if it is an IRF unit of an acute care hospital (or a CAH). We propose to update 

the adjustment factors using the most recent three years’ worth of IRF claims data (FY 2010, 

FY 2011, and FY 2012) and the most recent available corresponding IRF cost report data. As we 

did in the FY 2010 IRF PPS final rule (74 FR 39762), we propose to use the cost report data that 

corresponds with each IRF claim, when available. In the rare instances in which the 

corresponding year’s cost report data are not available, we propose to use the most recent 

available cost report data, as we also did in the FY 2010 IRF PPS final rule (74 FR 39762). 

 To calculate the proposed updates to the rural, LIP, and teaching status adjustment factors 

for FY 2014, we propose to use the following steps: 

 [Steps 1 and 2 are performed independently for each of three years of IRF claims data: 

FY 2010, FY 2011, and FY 2012.] 

 Step 1. Calculate the average cost per case for each IRF in the IRF claims data. 

Step 2. Use logarithmic regression analysis on average cost per case to compute the 

coefficients for the rural, LIP, and teaching status adjustments. We are also proposing to 

incorporate an additional indicator variable to account for whether a facility is a freestanding IRF 

hospital or a unit of an acute care hospital (or a CAH). 

 Step 3. Calculate a simple mean for each of the coefficients across the three years of data 

(using logarithms for the LIP and teaching status adjustment coefficients (because they are 

continuous variables), but not for the rural adjustment coefficient (because the rural variable is 
 39

either zero (if not rural) or 1 (if rural)). To compute the LIP and teaching status adjustment 

factors, we convert these factors back out of the logarithmic form. 

 Based on this methodology, we propose to update the rural adjustment factor for FY 2014 

from 18.4 percent to 14.28 percent. We propose to update the LIP adjustment factor for FY 2014 

from 0.4613 to 0.3158 and the teaching status adjustment factor for FY 2014 from 0.6876 to 

0.9859. The proposed adjustment factors are subject to change for the final rule if more data 

become available for use in these analyses. 

 Further, although we believe that updating the facility-level adjustment factors with the 

proposed methodology will enhance the accuracy and fairness of the IRF PPS payment rates, we 

recognize that this would result in significant financial impacts for IRF providers. Thus, we 

welcome comments from the industry on whether updating the adjustment factors at this time or 

freezing them at the current levels for an additional year would be a better approach. 

C. Budget Neutrality Methodology for the Updates to the IRF Facility-Level Adjustment 

Factors

 Consistent with the way that we implemented changes to the IRF facility-level 

adjustment factors (the rural, LIP, and teaching status adjustments factors) in the FY 2006 IRF 

PPS final rule (70 FR 47880 and 70 FR 57166), which was the only year in which we updated 

these adjustment factors, we propose to make changes to the rural, LIP, and teaching status 

adjustment factors for FY 2014 in such a way that total estimated aggregate payments to IRFs for 

FY 2014 would be the same with or without the proposed changes (that is, in a budget neutral 

manner) by applying budget neutrality factors for each of these three changes to the standard 

payment amount. To calculate the proposed budget neutrality factors used to update the rural, 

LIP, and teaching status adjustment factors, we propose to use the following steps: 
 40

 Step 1. Using the most recent available data (currently FY 2011), calculate the estimated 

total amount of IRF PPS payments that would be made in FY 2014 (without applying the 

proposed changes to the rural, LIP, or teaching status adjustment factors). 

 Step 2. Calculate the estimated total amount of IRF PPS payments that would be made in 

FY 2014 if the proposed update to the rural adjustment factor were applied. 

 Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2 to 

determine the proposed budget neutrality factor (1.0030) that would maintain the same total 

estimated aggregate payments in FY 2014 with and without the proposed change to the rural 

adjustment factor. 

Step 4. Calculate the estimated total amount of IRF PPS payments that would be made in 

FY 2014 if the proposed update to the LIP adjustment factor were applied. 

 Step 5. Divide the amount calculated in step 1 by the amount calculated in step 4 to 

determine the proposed budget neutrality factor (1.0174) that would maintain the same total 

estimated aggregate payments in FY 2014 with and without the proposed change to the LIP 

adjustment factor. 

 Step 6. Calculate the estimated total amount of IRF PPS payments that would be made in 

FY 2014 if the proposed update to the teaching status adjustment factor were applied. 

 Step 7. Divide the amount calculated in step 1 by the amount calculated in step 6 to 

determine the proposed budget neutrality factor (0.9966) that would maintain the same total 

estimated aggregate payments in FY 2014 with and without the proposed change to the teaching 

status adjustment factor. 

 Step 8. Apply the proposed budget neutrality factors for the updates to the rural, LIP, and 

teaching status adjustment factors to the FY 2013 IRF PPS standard payment amount after the 
 41

application of the proposed budget neutrality factors for the wage adjustment and the CMG 

relative weights. 

 The proposed budget neutrality factors for the proposed changes to the rural, LIP, and 

teaching status adjustment factors are subject to change in the final rule if more recent data 

become available for use in these analyses or if the proposed payment policies associated with 

the proposed budget neutrality factors change. In section V.E of this proposed rule, we discuss 

the proposed methodology for calculating the standard payment conversion factor for FY 2014. 

V. Proposed FY 2014 IRF PPS Federal Prospective Payment Rates 

A. Proposed Market Basket Increase Factor, Productivity Adjustment, Other Adjustment, 

and Secretary’s Recommendation for FY 2014

 Section 1886(j)(3)(C) of the Act requires the Secretary to establish an increase factor that 

reflects changes over time in the prices of an appropriate mix of goods and services included in 

the covered IRF services, which is referred to as a market basket index. According to section 

1886(j)(3)(A)(i) of the Act, the increase factor shall be used to update the IRF federal 

prospective payment rates for each FY. Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iii) of 

the Act required the application of a 0.3 percentage point reduction to the market basket increase 

factor for FY 2014. In addition, section 1886(j)(3)(C)(ii)(I) of the Act requires the application of 

a productivity adjustment, as described below. Thus, in this proposed rule, we are proposing to 

update the IRF PPS payments for FY 2014 by a market basket increase factor based upon the 

most current data available, with a productivity adjustment as required by 

section 1886(j)(3)(C)(ii)(I) of the Act as described below and a 0.3 percentage point reduction as 

required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iii) of the Act. 

For this proposed rule, we propose to use the same methodology described in the 
 42

FY 2012 IRF PPS final rule (76 FR 47836 at 47848 through 47863) to compute the FY 2014 

market basket increase factor and labor-related share. In that final rule, we rebased the RPL 

market basket from a 2002 base year to a 2008 base year. Based on IHS Global Insight’s first 

quarter 2013 forecast, the most recent estimate of the 2008-based RPL market basket increase 

factor for FY 2014 is 2.5 percent. IHS Global Insight (IGI) is an economic and financial 

forecasting firm that contracts with CMS to forecast the components of providers’ market 

baskets. 

In accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and using the methodology 

described in the FY 2012 IRF PPS final rule (76 FR 47836, 47858 through 47859), we propose 

to apply a productivity adjustment to the FY 2014 RPL market basket increase factor. The 

statute defines the productivity adjustment to be equal to the 10-year moving average of changes 

in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projected 

by the Secretary for the 10-year period ending with the applicable FY cost reporting period, or 

other annual period) (the “MFP adjustment”). The Bureau of Labor Statistics (BLS) is the 

agency that publishes the official measure of private nonfarm business MFP. We refer readers to 

the BLS website at http://www.bls.gov/mfp to obtain the historical BLS-published MFP data. 

The projection of MFP is currently produced by IGI, using the methodology described in the 

FY 2012 IRF PPS final rule (76 FR 47836, 47859). The most recent estimate of the MFP 

adjustment for FY 2014 (the 10-year moving average of MFP for the period ending FY 2014) is 

0.4 percent, which was calculated using the methodology described in the FY 2012 IRF PPS 

final rule (76 FR 47836, 47858 through 47859) and is based on IGI’s first quarter 2013 forecast. 

Thus, in accordance with section 1886(j)(3)(C) of the Act, we propose to base the 

FY 2014 market basket update, which is used to determine the applicable percentage increase for 
 43

the IRF payments, on the most recent estimate of the FY 2008-based RPL market basket 

(currently estimated to be 2.5 percent based on IGI’s first quarter 2013 forecast). We propose to 

then reduce this percentage increase by the current estimate of the MFP adjustment for FY 2014 

of 0.4 percentage point (the 10-year moving average of MFP for the period ending FY 2014 

based on IGI’s first quarter 2013 forecast), which was calculated as described in the FY 2012 

IRF PPS final rule (76 FR 47836, 47859). Following application of the productivity adjustment, 

we propose to further reduce the applicable percentage increase by 0.3 percentage point, as 

required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iii) of the Act. Therefore, the current 

estimate of the proposed FY 2014 IRF update is 1.8 percent (2.5 percent market basket update 

less 0.4 percentage point MFP adjustment less 0.3 percentage point legislative adjustment). 

Furthermore, we also are proposing that if more recent data are subsequently available (for 

example, a more recent estimate of the market basket and MFP adjustment), we would use such 

data, if appropriate, to determine the FY 2014 market basket update and MFP adjustment in the 

final rule. 

B. Secretary’s Proposed Recommendation

 For FY 2014, the Medicare Payment Advisory Commission (MedPAC) recommends that 

a 0 percent update be applied to IRF PPS payment rates for FY 2013. As discussed above, and 

in accordance with sections 1886(j)(3)(C) and 1886(j)(3)(D) of the Act, the Secretary is 

proposing to update IRF PPS payment rates for FY 2014 by an adjusted market basket increase 

factor of 1.8 percent because section 1886(j)(3)(C) of the Act does not provide the Secretary with 

the authority to apply a different update factor to IRF PPS payment rates for FY 2014. 

C. Proposed Labor-Related Share for FY 2014

The proposed labor-related share for FY 2014 is updated using the methodology 
 44

described in the FY 2012 IRF PPS final rule (76 FR 47836, 47860 through 47863). Using this 

method and IGI’s first quarter 2013 forecast of the 2008-based RPL market basket, the proposed 

IRF labor-related share for FY 2014 is the sum of the FY 2014 relative importance of each laborrelated cost category. This figure reflects the different rates of price change for these cost 

categories between the base year (FY 2008) and FY 2014. As shown in Table 3, the proposed 

FY 2014 labor-related share is 69.658 percent. We propose that if a more recent estimate of the 

FY 2014 labor-related share is subsequently available, we would use such data, if appropriate, to 

determine the FY 2014 labor-related share in the final rule. 

TABLE 3: Proposed FY 2014 IRF RPL Labor-Related Share Relative Importance 

Proposed FY 2014 Relative 

Importance Labor-Related Share 

Wages and Salaries 48.491 

Employee Benefits 13.019 

Professional Fees: Labor-Related 2.069 

Administrative and Business 

Support Services 0.417 

All Other: Labor-Related Services 2.086 

Subtotal 66.082 

Labor-Related Portion of Capital Costs (.46) 3.576 

Total Labor-Related Share 69.658 

Source: IHS Global Insight, Inc. 1st quarter 2013 forecast; Historical Data through 4th quarter, 2012. 

D. Proposed Area Wage Adjustment

Section 1886(j)(6) of the Act requires the Secretary to adjust the proportion of 

rehabilitation facilities’ costs attributable to wages and wage related costs (as estimated by the 

Secretary from time to time) by a factor (established by the Secretary) reflecting the relative 

hospital wage level in the geographic area of the rehabilitation facility compared to the national 

average wage level for those facilities. The Secretary is required to update the IRF PPS wage 
 45

index on the basis of information available to the Secretary on the wages and wage-related costs 

to furnish rehabilitation services. Any adjustment or updates made under section 1886(j)(6) of 

the Act for a FY are made in a budget neutral manner. 

 In the FY 2009 IRF PPS final rule (73 FR 46378), we maintained the methodology 

described in the FY 2006 IRF PPS final rule to determine the wage index, labor market area 

definitions and hold harmless policy consistent with the rationale outlined in the FY 2006 IRF 

PPS final rule (70 FR 47880, 47917 through 47926 ). 

 For FY 2014, we are maintaining the policies and methodologies described in the 

FY 2012 IRF PPS final rule (76 FR 47836, at 47863 through 47865) relating to the labor market 

area definitions and the wage index methodology for areas with wage data. Thus, we are using 

the CBSA labor market area definitions and the FY 2013 pre-reclassification and pre-floor 

hospital wage index data. In accordance with section 1886(d)(3)(E) of the Act, the FY 2013 

pre-reclassification and pre-floor hospital wage index is based on data submitted for hospital cost 

reporting periods beginning on or after October 1, 2008, and before October 1, 2009 (that is, 

FY 2009 cost report data). 

 The labor market designations made by the OMB include some geographic areas where 

there are no hospitals and, thus, no hospital wage index data on which to base the calculation of 

the IRF PPS wage index. We propose to continue to use the same methodology discussed in the 

FY 2008 IRF PPS final rule (72 FR 44299) to address those geographic areas where there are no 

hospitals and, thus, no hospital wage index data in which to base the calculation for the FY 2014 

IRF PPS wage index. 

In accordance with our established methodology, we have historically adopted any CBSA 

changes that are published in the OMB bulletin that corresponds with the hospital wage data 
 46

used to determine the IRF PPS wage index. The OMB bulletins are available at 

http://www.whitehouse.gov/omb/bulletins/index.html. 

In keeping with the established IRF PPS wage index policy, we propose to use the prior 

year’s (FY 2013) pre-floor, pre-reclassified hospital wage index data to derive the FY 2014 

applicable IRF PPS wage index. We anticipate using the FY 2014 pre-floor, pre-reclassified 

hospital wage index data to derive the applicable IRF PPS wage index for FY 2015. We note, 

however, that the proposed FY 2014 pre-floor, pre-reclassified hospital wage index does not use 

OMB’s new 2010 Census-based area delineations, which were outlined in the February 28, 2013 

OMB Bulletin 13-01. This bulletin contains a number of significant changes. For example, 

there are new CBSAs, counties that change from urban to rural, counties that change from rural 

to urban, and existing CBSAs that are being split apart. The OMB Bulletin with these changes 

was not published in time for us to incorporate these changes into the FY 2014 pre-floor, prereclassified hospital wage index, since the proposed rule was already in the advanced stages of 

development at that time and the changes and their ramifications would need to be extensively 

reviewed and verified prior to their inclusion in the rule. We therefore intend to propose the 

incorporation of these CBSA changes in our FY 2015 hospital wage index. Assuming that we 

would continue to follow our established methodology for the IRF PPS wage index, this means 

that the 2010 Census-based CBSA changes would not be reflected in the IRF PPS wage index 

until FY 2016. 

 To calculate the wage-adjusted facility payment for the payment rates set forth in this 

proposed rule, we multiply the unadjusted Federal payment rate for IRFs by the proposed 

FY 2014 labor-related share based on the FY 2008-based RPL market basket (69.658 percent) to 

determine the labor-related portion of the standard payment amount. We then multiply the labor-
 47

related portion by the applicable IRF wage index from the tables in the addendum to this 

proposed rule. These tables are available through the Internet on the CMS website at 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. 

Table A is for urban areas and Table B is for rural areas. 

 Adjustments or updates to the IRF wage index made under section 1886(j)(6) of the Act 

must be made in a budget neutral manner. We calculate a proposed budget neutral wage 

adjustment factor as established in the FY 2004 IRF PPS final rule (68 FR 45689), codified at 

§412.624(e)(1), as described in the steps below. We use the listed steps to ensure that the 

proposed FY 2014 IRF standard payment conversion factor reflects the update to the wage 

indexes (based on the FY 2009 hospital cost report data) and the proposed labor-related share in 

a budget neutral manner: 

 Step 1. Determine the total amount of the estimated FY 2013 IRF PPS rates, using the 

FY 2013 standard payment conversion factor and the labor-related share and the wage indexes 

from FY 2013 (as published in the FY 2013 IRF PPS notice (77 FR 44618)). 

 Step 2. Calculate the total amount of estimated IRF PPS payments using the FY 2013 

standard payment conversion factor and the proposed FY 2014 labor-related share and CBSA 

urban and rural wage indexes. 

 Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2. The 

resulting quotient is the proposed FY 2014 budget neutral wage adjustment factor of 1.0011. 

 Step 4. Apply the proposed FY 2014 budget neutral wage adjustment factor from step 3 

to the FY 2013 IRF PPS standard payment conversion factor after the application of the adjusted 

market basket update to determine the proposed FY 2014 standard payment conversion factor. 

 We discuss the calculation of the proposed standard payment conversion factor for 
 48

FY 2014 in section V.E. of this proposed rule. 

E. Description of the Proposed IRF Standard Conversion Factor and Payment Rates for FY 

2014

 To calculate the proposed standard payment conversion factor for FY 2014, as illustrated 

in Table 4, we begin by applying the proposed adjusted market basket increase factor for 

FY 2014 that was adjusted in accordance with sections 1886(j)(3)(C) and (D) of the Act, to the 

standard payment conversion factor for FY 2013 ($14,343). Applying the proposed 1.8 percent 

adjusted market basket increase factor for FY 2014 to the revised standard payment conversion 

factor for FY 2013 of $14,343 yields a standard payment amount of $14,601. Then, we apply 

the proposed budget neutrality factor for the FY 2014 wage index and labor-related share of 

1.0011, which results in a standard payment amount of $14,617. We next apply the proposed 

budget neutrality factors for the revised CMG relative weights of 1.0000, which results in a 

standard payment conversion factor of $14,617 for FY 2014. 

We then apply the proposed budget neutrality factors for the facility adjustments. 

Applying the budget neutrality factor for the revised rural adjustment of 1.0030 results in a 

standard payment conversion factor of $14,661. We then apply the budget neutrality factor for 

the revised LIP adjustment of 1.0174 resulting in a standard payment conversion factor of 

$14,916. Lastly, we apply the budget neutrality factor for the revised teaching adjustment of 

0.9966 which results in a final standard payment conversion factor of $14,865. 
 49

TABLE 4: Calculations to Determine the Proposed FY 2014 Standard Payment 

Conversion Factor 

Explanation for Adjustment Calculations 

Standard Payment Conversion Factor for FY 2013 $14,343 

Market Basket Increase Factor for FY 2014 (2.5 percent), 

reduced by 0.3 percentage point in accordance with 

sections 1886(j)(3)(C) and (D) of the Act and a 

0.4 percentage point reduction for the productivity 

adjustment as required by section 1886(j)(3)(C)(ii)(I) of 

the Act x 1.018 

Budget Neutrality Factor for the Wage Index and LaborRelated Share x 1.0011 

Budget Neutrality Factor for the Revisions to the CMG 

Relative Weights x 1.0000 

Budget Neutrality Factor for the Update to the Rural 

Adjustment Factor x 1.0030 

Budget Neutrality Factor for the Update to the LIP 

Adjustment Factor x 1.0174 

Budget Neutrality Factor for the Update to the Teaching 

Status Adjustment Factor x 0.9966 

Proposed FY 2014 Standard Payment Conversion Factor = $14,865 

 

After the application of the CMG relative weights described in Section III of this 

proposed rule, to the proposed FY 2014 standard payment conversion factor ($14,865), the 

resulting proposed unadjusted IRF prospective payment rates for FY 2014 are shown in Table 5. 

TABLE 5: Proposed FY 2014 Payment Rates 

CMG Payment Rate 

Tier 1 

 Payment Rate 

Tier 2 

Payment 

Rate Tier 3 

Payment Rate 

No 

Comorbidity 

0101 $ 11,893.49 $ 10,586.85 $ 9,745.49 $ 9,287.65 

0102 $ 14,747.57 $ 13,127.28 $ 12,083.76 $ 11,517.40 

0103 $ 17,262.72 $ 15,365.95 $ 14,145.53 $ 13,481.07 

0104 $ 18,150.17 $ 16,156.77 $ 14,873.92 $ 14,175.26 

0105 $ 21,231.68 $ 18,900.85 $ 17,398.00 $ 16,580.42 

0106 $ 24,270.09 $ 21,604.79 $ 19,887.88 $ 18,954.36 

0107 $ 27,370.92 $ 24,365.22 $ 22,428.31 $ 21,375.87 

0108 $ 34,427.34 $ 30,645.68 $ 28,210.80 $ 26,886.33 
 50

CMG Payment Rate 

Tier 1 

 Payment Rate 

Tier 2 

Payment 

Rate Tier 3 

Payment Rate 

No 

Comorbidity 

0109 $ 31,267.04 $ 27,833.23 $ 25,621.31 $ 24,417.25 

0110 $ 40,710.78 $ 36,240.87 $ 33,361.52 $ 31,793.26 

0201 $ 11,993.08 $ 10,160.23 $ 9,006.70 $ 8,385.35 

0202 $ 15,661.76 $ 13,268.50 $ 11,761.19 $ 10,949.56 

0203 $ 18,465.30 $ 15,643.93 $ 13,867.56 $ 12,910.25 

0204 $ 19,324.50 $ 16,370.82 $ 14,511.21 $ 13,510.80 

0205 $ 23,419.81 $ 19,840.32 $ 17,586.78 $ 16,373.80 

0206 $ 28,925.80 $ 24,504.95 $ 21,722.22 $ 20,223.83 

0207 $ 38,179.27 $ 32,344.75 $ 28,670.13 $ 26,693.08 

0301 $ 16,339.61 $ 14,065.26 $ 12,638.22 $ 11,682.40 

0302 $ 20,417.08 $ 17,576.38 $ 15,794.06 $ 14,597.43 

0303 $ 24,112.52 $ 20,757.49 $ 18,652.60 $ 17,238.94 

0304 $ 32,303.13 $ 27,809.44 $ 24,988.07 $ 23,095.75 

0401 $ 17,021.91 $ 14,112.83 $ 13,151.07 $ 11,777.54 

0402 $ 21,017.62 $ 17,427.73 $ 16,238.53 $ 14,543.92 

0403 $ 34,292.07 $ 28,433.77 $ 26,493.89 $ 23,729.00 

0404 $ 62,606.92 $ 51,910.07 $ 48,369.22 $ 43,319.58 

0405 $ 51,258.98 $ 42,502.01 $ 39,603.33 $ 35,469.38 

0501 $ 12,635.25 $ 10,002.66 $ 9,406.57 $ 8,563.73 

0502 $ 16,446.64 $ 13,020.25 $ 12,244.30 $ 11,148.75 

0503 $ 21,221.27 $ 16,800.42 $ 15,798.52 $ 14,384.86 

0504 $ 24,577.79 $ 19,456.80 $ 18,297.33 $ 16,659.21 

0505 $ 28,979.32 $ 22,941.15 $ 21,575.06 $ 19,642.61 

0506 $ 40,593.34 $ 32,136.64 $ 30,220.55 $ 27,515.12 

0601 $ 14,361.08 $ 11,706.19 $ 10,809.83 $ 9,794.55 

0602 $ 19,181.80 $ 15,635.01 $ 14,438.37 $ 13,082.69 

0603 $ 24,057.52 $ 19,608.42 $ 18,108.54 $ 16,407.99 

0604 $ 32,053.40 $ 26,125.24 $ 24,127.38 $ 21,860.47 

0701 $ 14,039.99 $ 11,969.30 $ 11,463.89 $ 10,399.55 

0702 $ 18,059.49 $ 15,395.68 $ 14,746.08 $ 13,377.01 

0703 $ 21,955.61 $ 18,716.52 $ 17,927.19 $ 16,262.31 

0704 $ 27,876.33 $ 23,764.68 $ 22,761.29 $ 20,648.97 

0801 $ 10,418.88 $ 9,272.79 $ 8,435.89 $ 7,729.80 

0802 $ 13,684.72 $ 12,178.89 $ 11,078.88 $ 10,152.80 

0803 $ 18,548.55 $ 16,507.58 $ 15,018.11 $ 13,760.53 

0804 $ 16,474.88 $ 14,661.35 $ 13,338.36 $ 12,222.00 

0805 $ 20,332.35 $ 18,095.16 $ 16,462.99 $ 15,085.00 
 51

CMG Payment Rate 

Tier 1 

 Payment Rate 

Tier 2 

Payment 

Rate Tier 3 

Payment Rate 

No 

Comorbidity 

0806 $ 24,661.04 $ 21,948.17 $ 19,968.15 $ 18,295.84 

0901 $ 13,417.15 $ 11,119.02 $ 10,249.42 $ 9,296.57 

0902 $ 17,913.81 $ 14,845.68 $ 13,684.72 $ 12,412.28 

0903 $ 22,437.23 $ 18,594.63 $ 17,139.35 $ 15,547.30 

0904 $ 29,224.59 $ 24,219.54 $ 22,325.74 $ 20,250.59 

1001 $ 15,417.98 $ 14,037.02 $ 12,086.73 $ 11,116.05 

1002 $ 19,444.91 $ 17,702.73 $ 15,244.06 $ 14,019.18 

1003 $ 28,734.05 $ 26,160.91 $ 22,526.42 $ 20,715.86 

1101 $ 18,414.76 $ 16,847.99 $ 15,588.93 $ 15,083.52 

1102 $ 25,373.07 $ 23,216.16 $ 21,479.93 $ 20,782.76 

1201 $ 14,094.99 $ 13,898.78 $ 12,586.20 $ 11,523.35 

1202 $ 17,560.02 $ 17,316.24 $ 15,681.09 $ 14,358.10 

1203 $ 21,808.44 $ 21,506.68 $ 19,474.64 $ 17,830.57 

1301 $ 17,563.00 $ 14,851.62 $ 13,385.93 $ 12,146.19 

1302 $ 22,750.88 $ 19,238.28 $ 17,341.51 $ 15,734.60 

1303 $ 29,249.86 $ 24,733.87 $ 22,294.53 $ 20,228.29 

1401 $ 13,176.34 $ 10,726.58 $ 9,720.22 $ 8,798.59 

1402 $ 17,797.86 $ 14,488.92 $ 13,128.77 $ 11,884.57 

1403 $ 21,708.85 $ 17,673.00 $ 16,014.06 $ 14,496.35 

1404 $ 27,675.66 $ 22,530.88 $ 20,415.59 $ 18,481.65 

1501 $ 14,869.46 $ 12,769.04 $ 11,515.92 $ 11,053.61 

1502 $ 18,715.04 $ 16,072.04 $ 14,494.86 $ 13,912.15 

1503 $ 22,630.48 $ 19,434.50 $ 17,527.32 $ 16,824.21 

1504 $ 28,088.90 $ 24,121.44 $ 21,753.44 $ 20,880.87 

1601 $ 15,324.33 $ 13,106.47 $ 12,311.19 $ 11,249.83 

1602 $ 20,121.26 $ 17,209.21 $ 16,164.20 $ 14,771.35 

1603 $ 25,347.80 $ 21,679.12 $ 20,363.56 $ 18,608.01 

1701 $ 16,165.69 $ 14,111.34 $ 12,696.20 $ 11,472.81 

1702 $ 20,232.75 $ 17,661.11 $ 15,889.20 $ 14,358.10 

1703 $ 24,418.74 $ 21,314.92 $ 19,177.34 $ 17,329.62 

1704 $ 30,980.15 $ 27,043.89 $ 24,331.03 $ 21,985.34 

1801 $ 17,059.07 $ 15,791.09 $ 13,883.91 $ 11,704.70 

1802 $ 25,431.04 $ 23,541.70 $ 20,698.03 $ 17,450.02 

1803 $ 40,655.78 $ 37,633.72 $ 33,088.00 $ 27,895.66 

1901 $ 16,289.07 $ 13,831.88 $ 13,473.64 $ 13,209.04 

1902 $ 31,721.91 $ 26,935.38 $ 26,239.70 $ 25,723.88 

1903 $ 52,027.50 $ 44,177.29 $ 43,035.66 $ 42,189.84 
 52

CMG Payment Rate 

Tier 1 

 Payment Rate 

Tier 2 

Payment 

Rate Tier 3 

Payment Rate 

No 

Comorbidity 

2001 $ 13,225.39 $ 10,857.40 $ 9,983.33 $ 9,124.14 

2002 $ 17,637.32 $ 14,480.00 $ 13,313.09 $ 12,168.49 

2003 $ 22,163.72 $ 18,196.25 $ 16,729.07 $ 15,290.14 

2004 $ 29,041.75 $ 23,841.97 $ 21,919.93 $ 20,035.05 

2101 $ 32,378.94 $ 23,393.05 $ 22,126.55 $ 20,894.24 

5001 $ - $ - $ - $ 2,290.70 

5101 $ - $ - $ - $ 9,816.85 

5102 $ - $ - $ - $ 21,631.55 

5103 $ - $ - $ - $ 11,376.18 

5104 $ - $ - $ - $ 29,625.95 

F. Example of the Methodology for Adjusting the Proposed Federal Prospective Payment 

Rates

 Table 6 illustrates the methodology for adjusting the proposed federal prospective 

payments (as described in sections V.A. through V.C. of this proposed rule). The following 

examples are based on two hypothetical Medicare beneficiaries, both classified into CMG 0110 

(without comorbidities). The proposed unadjusted federal prospective payment rate for 

CMG 0110 (without comorbidities) appears in Table 5. 

 Example: One beneficiary is in Facility A, an IRF located in rural Spencer County, 

Indiana, and another beneficiary is in Facility B, an IRF located in urban Harrison County, 

Indiana. Facility A, a rural non-teaching hospital has a Disproportionate Share Hospital (DSH) 

percentage of 5 percent (which would result in a LIP adjustment of 1.0155), a wage index of 

0.8472, and a rural adjustment of 14.28 percent. Facility B, an urban teaching hospital, has a 

DSH percentage of 15 percent (which would result in a LIP adjustment of 1.0451 percent), a 

wage index of 0.8862, and a teaching status adjustment of 0.0610. 

 To calculate each IRF’s labor and non-labor portion of the proposed Federal prospective 
 53

payment, we begin by taking the proposed unadjusted Federal prospective payment rate for 

CMG 0110 (without comorbidities) from Table 5. Then, we multiply the proposed labor-related 

share for FY 2014 (69.658 percent) described in section V.C. of this proposed rule by the 

proposed unadjusted federal prospective payment rate. To determine the non-labor portion of the 

proposed federal prospective payment rate, we subtract the labor portion of the proposed federal 

payment from the proposed unadjusted Federal prospective payment. 

 To compute the proposed wage-adjusted federal prospective payment, we multiply the 

labor portion of the proposed federal payment by the appropriate wage index found in tables A 

and B. These tables are available through the Internet on the CMS website at 

http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. 

The resulting figure is the wage-adjusted labor amount. Next, we compute the proposed wageadjusted federal payment by adding the wage-adjusted labor amount to the non-labor portion. 

 Adjusting the proposed wage-adjusted federal payment by the facility-level adjustments 

involves several steps. First, we take the wage-adjusted Federal prospective payment and 

multiply it by the appropriate rural and LIP adjustments (if applicable). Second, to determine the 

appropriate amount of additional payment for the teaching status adjustment (if applicable), we 

multiply the teaching status adjustment (0.0610, in this example) by the wage-adjusted and ruraladjusted amount (if applicable). Finally, we add the additional teaching status payments (if 

applicable) to the wage, rural, and LIP-adjusted federal prospective payment rates. Table 6 

illustrates the components of the adjusted payment calculation. 

TABLE 6: Example of Computing the IRF FY 2014 Federal Prospective Payment 

Steps 

Rural Facility A (Spencer 

Co., IN) 

Urban Facility B 

(Harrison Co., IN) 

1 

Unadjusted Federal 

Prospective Payment $ 31,793.26 $ 31,793.26 
 54

Steps 

Rural Facility A (Spencer 

Co., IN) 

Urban Facility B 

(Harrison Co., IN) 

2 Labor Share X 0.69658 X 0.69658

3 

Labor Portion of Federal 

Payment 

=

$22,146.55 = $22,146.55 

4 

CBSA Based Wage Index 

(shown in the Addendum , 

Tables 1 and 2) 

X

0.8472 X 0.8862

5 Wage-Adjusted Amount = $18,762.56 = $19,626.27 

6 Nonlabor Amount + $9,646.71 + $9,646.71 

7 

Wage-Adjusted Federal 

Payment 

 =

$28,409.27 = $29,272.98 

8 Rural Adjustment X 1.1428 X 1.000

9 

Wage- and Rural- Adjusted 

Federal Payment 

 =

$32,466.11 = $29,272.98 

10 LIP Adjustment X 1.0155 X 1.0451

11 

FY 2014 Wage-, Rural- and 

LIP- Adjusted Federal 

Prospective Payment Rate 

 =

$32,969.33 = $30,593.19 

12 

FY 2014 Wage- and RuralAdjusted Federal Prospective 

Payment $32,466.11 $29,272.98 

13 Teaching Status Adjustment X 0 X 0.0610

14 

Teaching Status Adjustment 

Amount 

=

$0.00 = $1,785.65 

15 

FY 2014 Wage-, Rural-, and 

LIP-Adjusted Federal 

Prospective Payment Rate 

 +

$32,969.33 + $30,593.19 

16 

Total FY 2014 Adjusted 

Federal Prospective Payment 

=

$32,969.33 = $32,378.84 

Thus, the proposed adjusted payment for Facility A would be $32,969.33 and the 

proposed adjusted payment for Facility B would be $32,378.84. 

VI. Proposed Update to Payments for High-Cost Outliers Under the IRF PPS

A. Proposed Update to the Outlier Threshold Amount for FY 2014

 Section 1886(j)(4) of the Act provides the Secretary with the authority to make payments 

in addition to the basic IRF prospective payments for cases incurring extraordinarily high costs. 

A case qualifies for an outlier payment if the estimated cost of the case exceeds the adjusted 
 55

outlier threshold. We calculate the adjusted outlier threshold by adding the IRF PPS payment for 

the case (that is, the CMG payment adjusted by all of the relevant facility-level adjustments) and 

the adjusted threshold amount (also adjusted by all of the relevant facility-level adjustments). 

Then, we calculate the estimated cost of a case by multiplying the IRF’s overall CCR by the 

Medicare allowable covered charge. If the estimated cost of the case is higher than the adjusted 

outlier threshold, we make an outlier payment for the case equal to 80 percent of the difference 

between the estimated cost of the case and the outlier threshold. 

 In the FY 2002 IRF PPS final rule (66 FR 41362 through 41363), we discussed our 

rationale for setting the outlier threshold amount for the IRF PPS so that estimated outlier 

payments would equal 3 percent of total estimated payments. For the 2002 IRF PPS final rule, 

we analyzed various outlier policies using 3, 4, and 5 percent of the total estimated payments, 

and we concluded that an outlier policy set at 3 percent of total estimated payments would 

optimize the extent to which we could reduce the financial risk to IRFs of caring for high-cost 

patients, while still providing for adequate payments for all other (non-high cost outlier) cases. 

 Subsequently, we updated the IRF outlier threshold amount in the FYs 2006 through 

2012 IRF PPS final rules and the FY 2011 and FY 2013 notices (70 FR 47880, 71 FR 48354, 

72 FR 44284, 73 FR 46370, 74 FR 39762, 75 FR 42836, 76 FR 47836, 76 FR 59256, and 

77 FR 44618, respectively) to maintain estimated outlier payments at 3 percent of total estimated 

payments. We also stated in the FY 2009 final rule (73 FR 46370 at 46385) that we would 

continue to analyze the estimated outlier payments for subsequent years and adjust the outlier 

threshold amount as appropriate to maintain the 3 percent target. 

 To update the IRF outlier threshold amount for FY 2014, we propose to use FY 2012 

claims data and the same methodology that we used to set the initial outlier threshold amount in 
 56

the FY 2002 IRF PPS final rule (66 FR 41316 and 41362 through 41363), which is also the same 

methodology that we used to update the outlier threshold amounts for FYs 2006 through 2013. 

Based on an analysis of this updated data, we estimate that IRF outlier payments as a percentage 

of total estimated payments are approximately 2.8 percent in FY 2014. Therefore, we propose to 

update the outlier threshold amount to $10,111 to maintain estimated outlier payments at 

approximately 3 percent of total estimated aggregate IRF payments for FY 2014. 

B. Proposed Update to the IRF Cost-to-Charge Ratio Urban and Rural Ceilings

 In accordance with the methodology stated in the FY 2004 IRF PPS final rule 

(68 FR 45674, 45692 through 45694), we apply a ceiling to IRFs’ CCRs. Using the 

methodology described in that final rule, we propose to update the national urban and rural CCRs 

for IRFs, as well as the national CCR ceiling for FY 2014, based on analysis of the most recent 

data that is available. We apply the national urban and rural CCRs in the following situations: 

● New IRFs that have not yet submitted their first Medicare cost report. 

● IRFs whose overall CCR is in excess of the national CCR ceiling for FY 2014, as 

discussed below. 

● Other IRFs for which accurate data to calculate an overall CCR are not available. 

 Specifically, for FY 2014, we estimate a proposed national average CCR of 0.638 for 

rural IRFs, which we calculate by taking an average of the CCRs for all rural IRFs using their 

most recently submitted cost report data. Similarly, we estimate a national average CCR of

0.511 for urban IRFs, which we calculate by taking an average of the CCRs for all urban IRFs 

using their most recently submitted cost report data. We apply weights to both of these averages 

using the IRFs’ estimated costs, meaning that the CCRs of IRFs with higher costs factor more 

heavily into the averages than the CCRs of IRFs with lower costs. For this proposed rule, we 
 57

have used the most recent available cost report data (FY 2011). This includes all IRFs whose 

cost reporting periods begin on or after October 1, 2010, and before October 1, 2011. If, for any 

IRF, the FY 2011 cost report was missing or had an “as submitted” status, we used data from a 

previous fiscal year’s (that is, FY 2004 through FY 2010) settled cost report for that IRF. We do 

not use cost report data from before FY 2004 for any IRF because changes in IRF utilization 

since FY 2004 resulting from the 60 percent rule and IRF medical review activities suggest that 

these older data do not adequately reflect the current cost of care. 

 In accordance with past practice, we propose to set the national CCR ceiling at 3 standard 

deviations above the mean CCR. Using this method, the national CCR ceiling is set at 1.43 for 

FY 2014. This means that, if an individual IRF’s CCR exceeds this ceiling of 1.43 for FY 2014, 

we would replace the IRF’s CCR with the appropriate national average CCR (either rural or 

urban, depending on the geographic location of the IRF). We estimate the national CCR ceiling 

by: 

 Step 1. Taking the national average CCR (weighted by each IRF’s total costs, as 

discussed above) of all IRFs for which we have sufficient cost report data (both rural and urban 

IRFs combined). 

 Step 2. Estimating the standard deviation of the national average CCR computed in step 

1. 

 Step 3. Multiplying the standard deviation of the national average CCR computed in step 

2 by a factor of 3 to compute a statistically significant reliable ceiling. 

 Step 4. Adding the result from step 3 to the national average CCR of all IRFs for which 

we have sufficient cost report data, from step 1. 

 We note that the proposed national average rural and urban CCRs and our estimate of the 
 58

national CCR ceiling in this section are subject to change in the final rule if more recent data 

become available for use in these analyses. 

VII. Proposed Refinements to the Presumptive Compliance Criteria Methodology 

A. Background on the Compliance Percentage

The compliance percentage has been part of the criteria for defining IRFs since 

implementation of the IPPS in 1983. In the September 1, 1983 interim final rule with comment 

period (48 FR 39752) which allowed IRFs to be paid separately from the IPPS, the initial 

compliance percentage was set at 75 percent. The 1983 interim rule stipulated that in accordance 

with sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act, a rehabilitation hospital and a 

rehabilitation unit were excluded from the IPPS. Sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) 

of the Act also give the Secretary the discretion to define a rehabilitation hospital and unit. 

A hospital or unit deemed excluded from the IPPS and paid under the IRF PPS must meet 

the general requirements in subpart B and subpart P of part 412. Subject to the special payment 

provisions of §412.22(c), a hospital or unit must meet the general criteria set forth in §412.22 

and in the regulations at §412.23(b), §412.25, and §412.29 that specify the criteria for a provider 

to be classified as a rehabilitation hospital or unit. Hospitals and units meeting these criteria are 

eligible to be paid on a prospective payment basis as an IRF under the IRF PPS. 

The 1983 interim final rule stipulated that one of the criteria for being classified as an 

IRF was that, during the facility’s most recently completed 12-month cost reporting period, the 

hospital must be primarily engaged in furnishing intensive rehabilitation services, as 

demonstrated by patient medical records, indicating that at least 75 percent of the IRF’s patient 

population were treated for one or more of the 10 medical conditions specified in the regulation 

that typically required the intensive inpatient rehabilitation treatment provided in an IRF. These 
 59

criteria, along with other related criteria, distinguished an inpatient rehabilitation hospital or unit 

from a hospital that furnished general medical or surgical services, as well as rehabilitation 

services. We believed then, as we do now, that by examining the types of conditions for which a 

hospital’s inpatients are treated, and the proportion of patients treated for conditions that 

typically require intensive inpatient rehabilitation, we would be able to distinguish those 

hospitals in which the provision of rehabilitation services was primary rather than secondary. 

Thus, Medicare pays for rehabilitation services at IRFs at a higher rate than other hospitals 

because IRFs are designed to offer specialized inpatient rehabilitation care to patients with 

intensive needs. 

 The original medical conditions specified under the compliance percentage, or 

“75 percent rule,” were stroke, spinal cord injury, congenital deformity, amputation, major 

multiple trauma, fracture of femur (hip fracture), brain injury, and polyarthritis (including 

rheumatoid arthritis). In the January 3, 1984 final rule (49 FR 234), we expanded the list of 

eligible medical conditions to include neurological disorders (including multiple sclerosis, motor 

neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson’s disease) and burns. In 

the May 7, 2004 final rule (69 FR 25752), we modified and expanded the list of eligible medical 

conditions by removing polyarthritis and substituting three more clearly defined arthritis-related 

conditions. The three conditions that replaced polyarthritis included the following: 

● Active, polyarticular rheumatoid arthritis, psoriatic arthritis, and seronegative 

arthropathies resulting in significant functional impairment of ambulation and other activities of 

daily living, which has not improved after an appropriate, aggressive, and sustained course of 

outpatient therapy services or services in other less intensive rehabilitation settings immediately 

preceding the inpatient rehabilitation admission or which results from a systemic disease 
 60

activation immediately before admission, but has the potential to improve with more intensive 

rehabilitation. 

● Systemic vasculidities with joint inflammation, resulting in significant functional 

impairment of ambulation and other activities of daily living, which has not improved after an 

appropriate, aggressive, and sustained course of outpatient therapy services or services in other 

less intensive rehabilitation settings immediately preceding the inpatient rehabilitation admission 

or which results from a systemic disease activation immediately before admission, but has the 

potential to improve with more intensive rehabilitation. 

● Severe or advanced osteoarthritis (osteoarthrosis or degenerative joint disease) 

involving three or more major joints (elbow, shoulders, hips, or knees) with joint deformity and 

substantial loss of range of motion, atrophy, significant functional impairment of ambulation and 

other activities of daily living, which has not improved after an appropriate, aggressive, and 

sustained course of outpatient therapy services or services in other less intensive rehabilitation 

settings immediately preceding the inpatient rehabilitation admission but has the potential to 

improve with more intensive rehabilitation. (A joint replaced by a prosthesis is no longer 

considered to have osteoarthritis, or other arthritis, even though this condition was the reason for 

the joint replacement.) 

In the May 7, 2004 final rule (69 FR 25752), a 13th condition was also added to include 

patients who undergo knee and/or hip joint replacement during an acute hospitalization 

immediately preceding the inpatient rehabilitation stay and also meet at least one of the 

following specific criteria: 

● Underwent bilateral knee or hip joint replacement surgery during the acute 

hospitalization immediately preceding the IRF admission. 
 61

● Are extremely obese patients as measured by the patient's Body Mass Index (BMI) of 

at least 50, at the time of admission to the IRF. 

● Are patients considered to be ''frail elderly,'' as determined by a patient's age of 85 or 

older, at the time of admission to the IRF (the provision currently states only that the patients be 

age 85 or older at the time of admission to the IRF.) 

In 2002, we surveyed Medicare fiscal intermediaries to determine how they were 

enforcing the 75 percent rule. Although the 75 percent rule was one of the criteria that was used 

to distinguish an IRF from an acute care hospital from 1983 to 2004, we found evidence that 

different fiscal intermediaries were enforcing the rule differently. We found fiscal intermediaries 

were using inconsistent methods to determine whether IRFs were in compliance with the 

regulation, and that some IRFs were not being reviewed for compliance at all. This led to 

concerns that some IRFs might have been out of compliance with the regulation and 

inappropriately classified as IRFs, while other IRFs may have been held to overly high standards. 

Because of these concerns we sought to establish a more uniform enforcement of the 75 percent 

rule. 

 In the May 16, 2003 IRF PPS proposed rule (68 FR 26786), we solicited comments on 

the regulatory requirements of the 75 percent rule. Though we did not, at that time, propose 

amending the regulatory requirements for the 75 percent rule located in then §412.23(b)(2), we 

did propose to amend these requirements in the September 9, 2003 proposed rule titled, 

“Medicare Program; Changes to the Criteria for Being Classified as an Inpatient Rehabilitation 

Facility” (68 FR 53266). In that rule, we proposed some revisions to the 75 percent rule, 

including lowering the compliance percentage to 65 percent during a 3-year transition period for 

cost reporting periods between January 1, 2004 and January 1, 2007. Also, in response to 
 62

comments on the September 9, 2003 proposed rule and as stated above, the May 7, 2004 final 

rule (69 FR 25752) expanded the number of medical conditions that would meet the compliance 

percentage from 10 to 13 and provided that patient comorbidities may also be included in 

determining an IRF’s compliance with the requirements during the transition period. 

 In the September 9, 2003 proposed rule, we defined a “comorbidity” as a specific patient 

condition that is secondary to the patient’s principal diagnosis or impairment that is the primary 

reason for the inpatient rehabilitation stay. In the May 7, 2004 rule, we adopted the provision to 

use a patient with a comorbidity counting towards the compliance threshold during the transition 

period. In the determination of the compliance percentage, a patient comorbidity counts toward 

the percentage if the comorbidity falls in one of the conditions specified at §412.29(b)(2) and has 

caused significant decline in functional ability in the individual that even in the absence of the 

admitting condition, the individual would require the intensive rehabilitation treatment that is 

unique to IRFs. 

Anticipating that IRFs needed some time to adjust and adapt their processes to the 

changes in the enforcement of the 75 percent rule, in the May 7, 2004 final rule, we provided 

IRFs with a 3-year phase-in period (cost reporting periods beginning on or after July 1, 2004 

through July 1, 2007) to establish the compliance threshold of 75 percent of the IRF’s total 

patient population. The 3-year phase-in period was intended to begin with cost reporting periods 

on or after July 1, 2004 with the threshold at 50 percent of the IRF’s population and gradually 

increase to 60 percent, then to 65 percent, and then to expire with cost reporting periods 

beginning on or after July 1, 2007, when the compliance percentage would once again be at 

75 percent. 

Section 5005 of the Deficit Reduction Act of 2005 (DRA, Pub. L. 109-171, enacted 
 63

February 8, 2006) and section 1886(d)(1)(B) of the Act modified the provisions of the 75 percent 

rule originally specified in the May 7, 2004 final rule. To reflect these statutory changes, in the 

August 7, 2007 final rule (72 FR 44284), we revised the regulations to prolong the overall 

duration of the phased transition to the full 75 percent threshold by stipulating that an IRF must 

meet the full 75 percent compliance threshold as of its first cost reporting period that starts on or 

after July 1, 2008. We also extended the policy of using a patient’s comorbidities to the extent 

they met the conditions as outlined in the regulations to determine compliance with the 

classification criteria at then §412.23(b)(2)(1) to the first cost reporting period that starts on or 

after July 1, 2008. 

Subsequently, section 115 of the MMSEA amended section 5005 of the DRA to revise 

elements of the 75 percent rule that are used to classify IRFs. In accordance with the statute, in 

the August 8, 2008 final rule (73 FR 46370), we revised the compliance rate that IRFs must meet 

to be excluded from the IPPS and be paid under the IRF PPS to 60 percent for cost reporting 

periods beginning in or after July 1, 2006. Also, in accordance with the statute, we required that 

patient comorbidities that satisfy the criteria as specified at then §412.23(b)(2)(i) [now located at 

§412.29(b)(1) and §412.29(b)(2)] be included in calculations used to determine whether an IRF 

meets the 60 percent compliance percentage for cost reporting periods beginning on or after 

July 1, 2007. As a result of these changes, the requirements started being referred to as the 

“60 percent rule,” instead of the “75 percent rule.” The regulations finalized in the FY 2009 IRF 

PPS Final Rule (73 FR 46370) continue to be in effect. 

Though an IRF must serve an inpatient population of whom at least 60 percent meet the 

compliance percentage criteria specified at §412.29(b), the existing regulation allows for 

40 percent of reasonable and necessary admissions to an IRF to fall outside of the 13 qualifying 
 64

medical conditions. Still, the “60 percent rule” is one of the primary ways we distinguish an IRF 

from an acute care hospital. As Medicare payments for IRF services are generally significantly 

higher than Medicare payments for similar services provided in acute care hospital settings, we 

believe that it is important to maintain and enforce the 60 percent rule compliance criteria to 

ensure that the higher Medicare payments are appropriately allocated to those providers that are 

providing IRF-level services. 

B. Proposed Changes to the ICD-9-CM Codes That Meet the Presumptive Compliance 

Criteria

The presumptive methodology is one of two ways that contractors may evaluate an IRF’s 

compliance with the 60 percent rule compliance criteria (the other methodology is called the 

medical review methodology). IRFs may be evaluated using the presumptive methodology only 

if their Medicare fee-for-service and Medicare Advantage populations combined make-up over 

half of their total patient populations, so that the Medicare populations can be presumed to be 

representative of the IRF’s total patient population. Thus, if an IRF is eligible to use the 

presumptive methodology to evaluate its compliance with the IRF 60 percent rule, all of its IRFPAI assessments from the most recently completed 12 month compliance review period are 

examined (with the use of a computer program) to determine whether they contain any of the 

codes listed on the presumptive methodology list. Under the rule, each IRF is given the option 

of whether the Medicare contractor reviews all IRF discharges from that period, or all 

admissions from that period. Each selected assessment is presumptively categorized as either 

meeting or not meeting the IRF 60 percent rule requirements based upon the primary reason for 

the patient to be treated in the IRF (the impairment group) and the ICD-9-CM codes listed as 

either the etiologic diagnosis (the etiologic problem that led to the condition for which the patient 
 65

is receiving rehabilitation) or one of 10 comorbidities on the assessment. An impairment group 

code is not an ICD-9-CM code, but part of a separate unique set of codes specifically developed 

for the IRF PPS for assigning the primary reason for admission to an IRF. The ICD-9-CM 

diagnosis codes that may be used to categorize a patient as meeting the 60 percent rule criteria if 

those codes appear on the patient’s IRF-PAI assessment as either the etiologic diagnosis or as a 

comorbid condition are listed in “Appendix C: ICD-9-CM Codes That Meet Presumptive 

Compliance Criteria.” This list can be downloaded from the October 1, 2007 IRF Compliance 

Rule Specification Files on the Medicare IRF PPS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Criteria.html. 

The underlying premise of the presumptive methodology ICD-9-CM code list is that it 

represents those codes that would be expected to “presumptively” meet the 60 percent rule 

compliance criteria. That is, it reflects those particular diagnosis codes that, if a patient is coded 

using one of those codes, would more than likely be expected to meet the requirement either that 

the patient required intensive rehabilitation services for treatment of one or more of the 

conditions specified at §412.29(b)(2) or had a comorbidity that caused significant decline in 

functional ability such that, even in the absence of the admitting condition, the patient would 

require the intensive rehabilitation treatment that is unique to inpatient rehabilitation facilities 

and cannot be appropriately performed in another care setting. 

Recently, we began a close examination of the list of ICD-9-CM codes that are currently 

deemed to meet the 60 percent rule under the presumptive method to begin the process of 

converting this code list to ICD-10-CM. Upon this examination, we found that changes over 

time (including changes in the use of the individual codes, changes in clinical practice, changes 
 66

in the frequency of various types of illness and disability, and changes to the application of 

60 percent rule itself) supported our updating the ICD-9-CM codes that are deemed to count 

toward a facility’s 60 percent rule compliance. Such updates would ensure that the codes better 

reflect the regulations at §412.29(b). 

Our review included taking a fresh look at the regulations in §412.29(b), which revealed 

that the following parts of the regulation were not being adequately addressed in the current 

application of the presumptive method of calculating compliance with the IRF 60 percent rule: 

● The details of the requirements in paragraph §412.29(b)(1), which specify that the IRF 

must serve “an inpatient population of whom at least 60 percent required intensive rehabilitation 

services for treatment of one or more of the conditions specified...”, and 

● The details of the requirements regarding the specific conditions under which a 

patient’s comorbidity may be used to show that a patient meets the 60 percent rule criteria, 

specifically that, “The comorbidity has caused significant decline in functional ability in the 

individual that, even in the absence of the admitting condition, the individual would require the 

intensive rehabilitation treatment that is unique to inpatient rehabilitation facilities...and that 

cannot be appropriately performed in another care setting...” 

These requirements must be met in conjunction with a patient having one of the 

13 conditions listed in §412.29(b)(2) for the case to meet the 60 percent rule compliance criteria. 

It is not enough for the patient to just have one of the 13 conditions. Mindful of these 

requirements, we took a fresh look at the ICD-9-CM codes on the presumptive methodology list. 

Further, the regulations in §412.29 also specify that the arthritis conditions only meet the 

60 percent rule compliance criteria if certain severity and prior treatment criteria are met. It is 

impossible to discern from the ICD-9-CM codes themselves whether or not the required severity 
 67

and prior treatment criteria are met for those patients being treated for arthritis conditions. This 

type of information can only be assessed on medical review. Thus, we found that the presence of 

the ICD-9-CM code, by itself, cannot allow us to presume that patients meet all of the 

requirements for being counted toward a facility’s meeting the 60 percent rule requirements. As 

such, we believe that certain ICD-9-CM codes currently on the presumptive methodology list do 

not necessarily demonstrate a patient’s meeting the requirements for inclusion in a facility’s 60 

percent compliance threshold, and, as such, should be removed from the list to better reflect the 

regulations. 

Therefore, we performed a clinical analysis of the ICD-9-CM code list to determine the 

clinical appropriateness of each individual ICD-9-CM code’s inclusion on the list, and a 

statistical analysis of the ICD-9-CM diagnoses code list to enhance our understanding of how 

individual ICD-9-CM codes are being used by IRFs. Based on these analyses, we are proposing 

specific revisions to the ICD-9-CM code list that are described below in sections VII.B.1 through 

VII.B.6 of this proposed rule. 

We encourage stakeholders comment on the following proposals. All such public 

comment(s) will be addressed in the final rule. 

1. Non-Specific Diagnosis Codes 

 We believe that highly descriptive codes provide the best and clearest way to ensure the 

appropriateness of a given patient’s inclusion in the presumptive method of calculating a 

facility’s compliance percentage. Therefore, whenever possible, we believe that the most 

specific code that describes a medical disease, condition, or injury should be documented on the 

IRF-PAI. Generally, “unspecified” codes are used when there is lack of information about 

location or severity of medical conditions in the medical record. However, site and/or severity of 
 68

condition is an important determinant in assessing whether a patient’s principal or secondary 

diagnosis falls into the 13 qualifying conditions and, as such, should count toward the facility’s 

compliance with the 60 percent rule. For this reason, and in accordance with ICD-9-CM coding 

guidelines, we believe that specific diagnosis codes that narrowly identify anatomical sites where 

disease, injury, or condition exist should be required when coding patients’ conditions on the 

IRF-PAI whenever such codes are available. Furthermore, on the same note, we believe that one 

should also include on the IRF-PAI the more descriptive ICD-9-CM code that indicates the 

degree of injury in instances of burns. In accordance with these principles, we propose to 

remove non-specific codes from Appendix C whenever more specific codes are available as we 

believe imprecise codes would inappropriately categorize an overly broad segment of the patient 

population as having the conditions required for inclusion in a facility’s compliance percentage. 

If the IRF does not have enough information about the patient’s condition to code the more 

specific codes on the IRF-PAI, we would expect the IRF to seek out additional information from 

the patient’s acute care hospital medical record to determine the appropriate, more specific code 

to use. 

 For example, the current ICD-9-CM codes 820.8 “Unspecified part of neck of femur, 

closed” and 820.9 “Unspecified part of neck of femur, open”, which indicate hip fractures, could 

be replaced with more specific codes( 820.01-820.09, 820.11-820.19,820.21-820.22, or 820.31-

820.32). We believe that the proposed removal of the unspecified codes listed in Table 7, 

“Proposed ICD-9-CM Codes To Be Removed From the Appendix C: ICD-9-CM Codes That 

Meet Presumptive Compliance Criteria,” would not negatively impact a provider’s ability to 

meet the compliance percentage threshold because these diagnoses could be coded under the 

aforementioned more specific codes. More specific codes will aid us in determining (by the 
 69

nature of the site, severity, degree of injury, etc.) whether a patient’s principal or secondary 

diagnosis falls into the 13 qualifying conditions and should count toward the 60 percent rule. 

2. Arthritis Codes 

Our analysis of the list of ICD-9-CM codes that are currently deemed to meet the 

60 percent rule required us to reexamine the overall application of the compliance criteria in 

regards to the arthritis codes. Utilization patterns for the arthritis codes indicated that some of 

the codes in this category are coded far more frequently than we had anticipated, given the 

severity and prior treatment requirements outlined in regulation. When we adopted the arthritis 

conditions in the FY 2004 final rule (69 FR 25752), we did so because we believed that these 

conditions were appropriate for treatment in an IRF. However, we limited the arthritis 

conditions to those that were sufficiently severe and in which intensive inpatient rehabilitation 

would be an appropriate modality of treatment. We anticipated that less severe arthritic 

conditions could be satisfactorily managed outside of IRFs since these cases would not require 

the intensive therapy provided in the inpatient rehabilitation setting. Likewise, we expected that 

even in cases where patients with arthritis conditions severe enough to require intensive inpatient 

rehabilitation, some patients would improve after an appropriate, aggressive, and sustained 

course of treatment in an outpatient setting. “An appropriated, aggressive, and sustained course 

of treatment in an outpatient setting” is defined in Chapter 3, section 140.1.1.C of the Medicare 

Claims Processing Manual (Pub. 100-04). We believe that there may be arthritis ICD-9-CM 

codes entered on the IRF-PAI for cases that do not meet the severity and prior treatment 

requirements outlined in regulation. Thus, after reexamining our application of the compliance 

criteria in regards to the arthritis codes, we determined that factors beyond the ICD-9-CM code 

should be reviewed to establish whether these IRF patients should be included in the IRF’s 
 70

compliance percentage. 

In the regulations at §412.29(b)(2)(x) through §412.29(b)(2)(xii), we describe 3 medical 

conditions that, if present, make a patient eligible for inclusion in the calculation of the 

compliance percentage if additional circumstances are met. The 3 medical conditions are as 

follows: 

● Active, polyarticular rheumatoid arthritis, psoriatic arthritis, and seronegative 

arthropathies resulting in significant functional impairment of ambulation and other activities of 

daily living that have not improved after an appropriate, aggressive, and sustained course of 

outpatient therapy services or services in other less intensive rehabilitation settings immediately 

preceding the inpatient rehabilitation admission or that result from a systemic disease activation 

immediately before admission, but have the potential to improve with more intensive 

rehabilitation. 

● Systemic vasculidities with joint inflammation, resulting in significant functional 

impairment of ambulation and other activities of daily living that have not improved after an 

appropriate, aggressive, and sustained course of outpatient therapy services or services in other 

less intensive rehabilitation settings immediately preceding the inpatient rehabilitation admission 

or that result from a systemic disease activation immediately before admission, but have the 

potential to improve with more intensive rehabilitation. 

● Severe or advanced osteoarthritis (osteoarthrosis or degenerative joint disease) 

involving two or more major weight bearing joints (elbow, shoulders, hips, or knees, but not 

counting a joint with a prosthesis) with joint deformity and substantial loss of range of motion, 

atrophy of muscles surrounding the joint, significant functional impairment of ambulation and 

other activities of daily living that have not improved after the patient has participated in an 
 71

appropriate, aggressive, and sustained course of outpatient therapy services or services in other 

less intensive rehabilitation settings immediately preceding the inpatient rehabilitation admission 

but have the potential to improve with more intensive rehabilitation. (A joint replaced by a 

prosthesis no longer is considered to have osteoarthritis, or other arthritis, even though this 

condition was the reason for the joint replacement.) 

As stated above, the inclusion of patients with these medical conditions in the compliance 

percentage is conditioned on those patients meeting certain severity and prior treatment 

requirements. However, the ICD-9-CM diagnosis codes that reflect these arthritis and 

arthropathy conditions do not provide any information about whether or not these additional 

eligibility requirements were met. We believe that a qualitative assessment (such as a medical 

review) is necessary to determine if the medical record would support inclusion of individuals 

with the arthritis and arthropathy conditions outlined in our regulations at §412.29(b)(2)(x) 

through §412.29(b)(2)(xii) in a facility’s compliance percentage. Thus, we propose to remove 

the ICD-9-CM diagnosis codes associated with the medical conditions outlined in our regulations 

at §412.29(b)(2)(x) through §412.29(b)(2)(xii) from the presumptive method ICD-9-CM code 

list in Appendix C. 

We expect that the FI/MAC will be able, upon medical review, to include those patients 

in a facility’s 60 percent rule compliance percentage in accordance with chapter 3, §140.1.4 of 

the Medicare Claims Processing Manual (Pub. 100-04) after it has confirmed the severity and 

prior treatment requirements. So IRFs will continue to be able to include these individuals in 

their compliance percentages. In Table 7, we list the ICD-9-CM codes associated with the 

medical conditions listed at §412.29(b)(2)(x) through §412.29(b)(2)(xii) that we propose to 

remove from Appendix C. 
 72

3. Some Congenital Anomaly Diagnosis Codes 

Though congenital deformity is one of the 13 medical conditions that may generally 

qualify for inclusion in the presumptive method for calculating compliance with the 60 percent 

rule, we find that some of the specific ICD-9-CM diagnosis codes in Appendix C for congenital 

anomalies represent such serious conditions that a patient with one of these conditions would be 

unlikely to be able to meaningfully participate in an intensive rehabilitation therapy program. 

For example, Craniorachischisis (ICD-9-CM code 740.1) is a congenital malformation where the 

neural tube from the midbrain down to the upper sacral region of the spinal cord remains open. 

The neural tube is the embryo’s precursor to the central nervous system, which comprises the 

brain and spinal cord. Similarly, Iniencephaly (ICD-9-CD code 740.2) is a congenital 

malformation in which parts of the brain do not form and the patient does not have a neck. If a 

patient with one of these conditions were able to participate in the intensive rehabilitation 

services provided in an IRF, then the FI/MAC would be able to count that case toward an IRF’s 

60 percent rule compliance calculation upon medical review. However, because beneficiaries 

with these diagnoses likely would not be able to actively participate in an intensive rehabilitation 

program, we do not believe that we can presumptively include such cases in an IRF’s compliance 

percentage. Thus, we propose to remove these congenital deformity codes, and others like them, 

from Appendix C. All of the congenital anomaly diagnosis codes that we propose to remove 

from appendix C are listed in table 7. 

4. Unilateral Upper Extremity Amputations Diagnosis Codes 

Though amputation is generally one of the 13 medical conditions that qualify for 

inclusion in the presumptive method for calculating compliance with the 60 percent rule, we 

propose the removal of certain ICD-9-CM codes for unilateral upper extremity amputations from 
 73

Appendix C because we believe that it is impossible to determine, from the presence of such 

ICD-9-CM codes alone, whether a patient with such a unilateral upper extremity amputation has 

a condition for which he or she would qualify for treatment in an IRF. Some patients with upper 

extremity amputations will not require close medical supervision by a physician or weekly 

interdisciplinary team conferences to achieve their goals, while others may require these 

services. We believe that rehabilitation associated with unilateral upper extremity amputations 

does not necessarily need to be accompanied by the close medical management provided in 

IRFs, as long as the patient does not have any additional comorbidities that have caused 

significant decline in his or her functional ability that, in the absence of the unilateral upper 

extremity amputation, would necessitate treatment in an IRF. That is to say, a patient’s need for 

intensive rehabilitation services provided in an IRF may depend on other conditions which 

cannot be solely identified through the presence of a unilateral upper extremity amputation 

ICD-9-CM code. If the patient has comorbidities that would necessitate treatment in an IRF, 

then those comorbidities could qualify the patient for inclusion in the presumptive method of 

calculating compliance with the 60 percent rule requirements. If the codes for such a patient’s 

comorbidities do not appear in Appendix C, they could be found on medical review to meet the 

criteria for inclusion in the IRF’s 60 percent rule compliance rate. Thus, we propose to remove 

the unilateral upper extremity amputation ICD-9-CM codes listed in Table 7. 

5. Miscellaneous Diagnosis Codes That Do Not Require Intensive Rehabilitation Services 

For Treatment 

We have identified additional ICD-9-CM diagnosis codes in Appendix C that should not 

be included in the listing because as single conditions, they do not serve as an indication of a 

patient qualifying for inclusion in an IRF’s compliance percentage under the presumptive 
 74

method for calculating compliance with the 60 percent rule. These patients generally do not 

require intensive rehabilitation services or cannot be shown to have undergone appropriate 

diagnostic testing based on the ICD-9-CM code alone. For the reasons discussed below, we 

propose to remove the following ICD-9-CM codes from Appendix C. (These ICD-9-CM codes 

are also listed in Table 7): 

● Tuberculous (abscess, meningitis, and encephalitis or myelitis) and Tuberculoma (of 

the meninges, brain, or spinal cord) where a bacterial or histological examination was not done 

(see Table 7 for specific codes)- Appropriate patient care dictates that the IRF physician must 

document the means by which the organism, whether it be bacteriologic or histologic, was tested. 

We are proposing to remove these codes from the list in Appendix C because the 

subclassification indicates that a bacteriologic or histologic examination has not been performed. 

● Postherpetic polyneuropathy (053.13)- This is a condition characterized by severe 

pain, which typically requires pain medication or other pain control therapies but does not 

typically require the intensive inpatient rehabilitation services of an IRF. In fact, the prescriptive 

hands-on therapeutic interventions provided in an IRF could exacerbate the patient’s pain. For 

these reasons, we are proposing to remove this code from Appendix C. 

● Louping ill (063.1)- This ICD-9-CM code refers to an acute viral disease primarily of 

sheep that is not endemic to the United States. Louping ill disease has been recognized in 

Scotland for centuries, but only 39 cases of human infection have been described and none of 

these cases have been observed in the United States. Louping ill is a disease which has many 

manifestations, not all requiring inpatient rehabilitation hospital services. We believe that the 

ICD-9-CM code for this diagnosis does not provide the information necessary for us to 

determine presumptively if the patient should count toward the IRF’s compliance threshold. 
 75

However, as with all of the codes that we are proposing to remove from appendix C, if someone 

with this diagnosis were to be admitted to an IRF, where appropriate, it could be found by an 

FI/MAC to meet the 60 percent rule requirements on medical review. 

● Brain death (348.82)- We believe that it is unlikely that a patient with this condition 

would require the intensive inpatient rehabilitation services provided in an IRF. For this reason, 

we propose to remove this code from Appendix C. 

● Myasthenia gravis without (acute) exacerbation (358.00)- Although we believe that a 

patient experiencing an acute attack of Myasthenia Gravis could potentially require the services 

of an IRF (see ICD-9 code 358.01 “Myasthenia gravis with ( acute) exacerbation”), the 

ICD-9-CM code that we propose to remove from appendix C is used for patients who are not 

experiencing an acute exacerbation of the condition and most likely do not require the intensive 

inpatient rehabilitation services provided in an IRF. 

● Other specified myotonic disorder (359.29)- Myotonia fluctuans, myotonia permanens, 

and paramyotonia congenital reflect conditions that are exacerbated by exercise. Therefore, 

these conditions would not likely require the intensive inpatient rehabilitation services of an IRF. 

Therefore, we are proposing to remove it from the list in appendix C. 

● Periodic paralysis (359.3)- The treatment for periodic paralysis involves 

pharmaceutical interventions and lifestyle changes that control exercise and activity, but patients 

with this condition do not generally require the intensive inpatient rehabilitation services of an 

IRF. In fact, it is unclear how the intensive inpatient rehabilitation services provided in an IRF 

would effectively treat this condition. Thus, we propose to remove this code from the list in 

Appendix C. 
 76

● Brachial plexus lesions (353.0)- Care and treatment for this condition affecting an 

upper extremity do not typically require close medical supervision by a physician or weekly 

interdisciplinary team meetings to reach the patient’s goals. Thus, patients with this condition do 

not typically require the intensive inpatient rehabilitation services provided in an IRF. 

Therefore, we propose to remove this code from the list in appendix C. 

● Neuralgic amyothrophy (353.5)- This condition is also known as Parsonage-Turner 

syndrome or brachial plexus neuritis. It is a distinct peripheral nervous system disorder 

characterized by attacks of extreme neuropathic pain and rapid multifocal weakness and atrophy 

in the upper limbs. Patients with this condition do not typically require close medical 

supervision by a physician or weekly interdisciplinary team meetings to reach the patient’s 

therapy goals. Thus, patients with this condition do not typically require the intensive inpatient 

rehabilitation services provided in an IRF. Therefore, we propose to remove this code from the 

list Appendix C. 

● Other nerve root and plexus disorders (353.8)- More descriptive codes provide the 

clearest way to ensure the appropriateness of a patient’s inclusion in the compliance percentage. 

For example, Lumbosacral plexus lesions (353.1) could substitute for Other nerve root and 

plexus disorders (353.8). Thus, patients with this condition do not typically require the intensive 

inpatient rehabilitation services provided in an IRF. Therefore, we propose to remove this code 

from the list in Appendix C. 

6. Additional Diagnosis Codes 

During our review of the diagnosis codes that meet the 60 percent compliance criteria, we 

did not identify any ICD-9-CM codes that would be appropriate to add to the list. However, we 

welcome public comment regarding ICD-9-CM diagnosis codes that are not currently on the 
 77

presumptive methodology list of codes that stakeholders believe should be added to the list and 

that specifically identify one of the conditions listed at §412.29(b)(2), that require intensive 

inpatient rehabilitation, and can be presumptively identified by a ICD-9-CM code. 
 78

TABLE 7: Proposed ICD-9-CM Codes To Be Removed From Appendix C: ICD-9-CM 

Codes That Meet Presumptive Compliance Criteria 

ICD-9-CM 

Code Diagnosis 

013.00 Tuberculous meningitis, unspecified 

013.01 Tuberculous meningitis, bacteriological or histological examination not done 

013.10 Tuberculoma of meninges, unspecified 

013.11 Tuberculoma of meninges, bacteriological or histological examination not done 

013.20 Tuberculoma of brain, unspecified 

013.21 Tuberculoma of brain, bacteriological or histological examination not done 

013.30 Tuberculous abscess of brain, unspecified 

013.31 Tuberculous abscess of brain, bacteriological or histological examination not done 

013.40 Tuberculoma of spinal cord, unspecified 

013.41 Tuberculoma of spinal cord, bacteriological or histological examination not done 

013.50 Tuberculous abscess of spinal cord, unspecified 

013.51 Tuberculous abscess of spinal cord, bacteriological or histological examination not done 

013.60 Tuberculous encephalitis or myelitis, unspecified 

013.61 Tuberculous encephalitis or myelitis, bacteriological or histological examination not 

done 

047.9 Unspecified viral meningitis 

049.9 Unspecified non-arthropod-borne viral diseases of central nervous system 

053.13 Postherpetic polyneuropathy 

062.9 Mosquito-borne viral encephalitis, unspecified 

063.1 Louping ill 

063.9 Tick-borne viral encephalitis, unspecified 

320.9 Meningitis due to unspecified bacterium 

322.9 Meningitis, unspecified 

323.9 Unspecified causes of encephalitis, myelitis, and encephalomyelitis 

324.9 Intracranial and intraspinal abscess of unspecified site 

335.10 Spinal muscular atrophy, unspecified 

335.9 Anterior horn cell disease, unspecified 

336.9 Unspecified disease of spinal cord 

341.9 Demyelinating disease of central nervous system, unspecified 

342.00 Flaccid hemiplegia and hemiparesis affecting unspecified side 

342.10 Spastic hemiplegia and hemiparesis affecting unspecified side 

342.80 Other specified hemiplegia and hemiparesis affecting unspecified side 

342.90 Hemiplegia, unspecified, affecting unspecified side 

342.91 Hemiplegia, unspecified, affecting dominant side 

342.92 Hemiplegia, unspecified, affecting nondominant side 

343.3 Congenital monoplegia 
 79

ICD-9-CM 

Code Diagnosis 

343.9 Infantile cerebral palsy, unspecified 

344.00 Quadriplegia, unspecified 

344.5 Unspecified monoplegia 

348.82 Brain death 

353.0 Brachial plexus lesions 

353.2 Cervical root lesions, not elsewhere classified 

353.3 Thoracic root lesions, not elsewhere classified 

353.4 Lumbosacral root lesions, not elsewhere classified 

353.5 Neuralgic amyotrophy 

353.8 Other nerve root and plexus disorders 

354.5 Mononeuritis multiplex 

356.9 Unspecified hereditary and idiopathic peripheral neuropathy 

358.00 Myasthenia gravis without (acute) exacerbation 

359.29 Other specified myotonic disorder 

359.3 Periodic paralysis 

432.9 Unspecified intracranial hemorrhage 

438.20 Late effects of cerebrovascular disease, hemiplegia affecting unspecified side 

438.30 Late effects of cerebrovascular disease, monoplegia of upper limb affecting unspecified 

side 

438.31 Late effects of cerebrovascular disease, monoplegia of upper limb affecting dominant 

side 

438.32 Late effects of cerebrovascular disease, monoplegia of upper limb affecting nondominant 

side 

438.40 Late effects of cerebrovascular disease, monoplegia of lower limb affecting unspecified 

side 

438.50 Late effects of cerebrovascular disease, other paralytic syndrome affecting unspecified 

side 

433.91 Occlusion and stenosis of unspecified precerebral artery with cerebral infarction 

434.91 Cerebral artery occlusion, unspecified with cerebral infarction 

446.0 Polyarteritis nodosa 

711.20 Arthropathy in Behcet's syndrome, site unspecified 

711.21 Arthropathy in Behcet's syndrome, shoulder region 

711.22 Arthropathy in Behcet's syndrome, upper arm 

711.23 Arthropathy in Behcet's syndrome, forearm 

711.24 Arthropathy in Behcet's syndrome, hand 

711.25 Arthropathy in Behcet's syndrome, pelvic region and thigh 

711.26 Arthropathy in Behcet's syndrome, lower leg 

711.27 Arthropathy in Behcet's syndrome, ankle and foot 

711.28 Arthropathy in Behcet's syndrome, other specified sites 

711.29 Arthropathy in Behcet's syndrome, multiple sites 

713.0 Arthropathy associated with other endocrine and metabolic disorders 
 80

ICD-9-CM 

Code Diagnosis 

713.1 Arthropathy associated with gastrointestinal conditions other than infections 

713.2 Arthropathy associated with hematological disorders 

713.3 Arthropathy associated with dermatological disorders 

713.4 Arthropathy associated with respiratory disorders 

713.6 Arthropathy associated with hypersensitivity reaction 

713.7 Other general diseases with articular involvement 

714.0 Rheumatoid arthritis 

714.1 Felty's syndrome 

714.2 Other rheumatoid arthritis with visceral or systemic involvement 

714.32 Pauciarticular juvenile rheumatoid arthritis 

714.81 Rheumatoid lung 

714.89 Other specified inflammatory polyarthropathies 

714.9 Unspecified inflammatory polyarthropathy 

715.11 Osteoarthrosis, localized, primary, shoulder region 

715.12 Osteoarthrosis, localized, primary, upper arm 

715.15 Osteoarthrosis, localized, primary, pelvic region and thigh 

715.16 Osteoarthrosis, localized, primary, lower leg 

715.21 Osteoarthrosis, localized, secondary, shoulder region 

715.22 Osteoarthrosis, localized, secondary, upper arm 

715.25 Osteoarthrosis, localized, secondary, pelvic region and thigh 

715.26 Osteoarthrosis, localized, secondary, lower leg 

715.31 Osteoarthrosis, localized, not specified whether primary or secondary, shoulder region 

715.32 Osteoarthrosis, localized, not specified whether primary or secondary, upper arm 

715.35 Osteoarthrosis, localized, not specified whether primary or secondary, pelvic region and 

thigh 

715.36 Osteoarthrosis, localized, not specified whether primary or secondary, lower leg 

716.01 Kaschin-Beck disease, shoulder region 

716.02 Kaschin-Beck disease, upper arm 

716.05 Kaschin-Beck disease, pelvic region and thigh 

716.06 Kaschin-Beck disease, lower leg 

716.11 Traumatic arthropathy, shoulder region 

716.12 Traumatic arthropathy, upper arm 

716.15 Traumatic arthropathy, pelvic region and thigh 

716.16 Traumatic arthropathy, lower leg 

716.21 Allergic arthritis, shoulder region 

716.22 Allergic arthritis, upper arm 

716.25 Allergic arthritis, pelvic region and thigh 

716.26 Allergic arthritis, lower leg 

716.51 Unspecified polyarthropathy or polyarthritis, shoulder region 

716.52 Unspecified polyarthropathy or polyarthritis, upper arm 
 81

ICD-9-CM 

Code Diagnosis 

716.55 Unspecified polyarthropathy or polyarthritis, pelvic region and thigh 

716.56 Unspecified polyarthropathy or polyarthritis, lower leg 

719.30 Palindromic rheumatism, site unspecified 

719.31 Palindromic rheumatism, shoulder region 

719.32 Palindromic rheumatism, upper arm 

719.33 Palindromic rheumatism, forearm 

719.34 Palindromic rheumatism, hand 

719.35 Palindromic rheumatism, pelvic region and thigh 

719.36 Palindromic rheumatism, lower leg 

719.37 Palindromic rheumatism, ankle and foot 

719.38 Palindromic rheumatism, other specified sites 

719.39 Palindromic rheumatism, multiple sites 

720.0 Ankylosing spondylitis 

720.81 Inflammatory spondylopathies in diseases classified elsewhere 

720.89 Other inflammatory spondylopathies 

721.91 Spondylosis of unspecified site, with myelopathy 

722.70 Intervertebral disc disorder with myelopathy, unspecified region 

740.1 Craniorachischisis 

740.2 Iniencephaly 

741.00 Spina bifida with hydrocephalus, unspecified region 

741.90 Spina bifida without mention of hydrocephalus, unspecified region 

742.1 Microcephalus 

754.30 Congenital dislocation of hip, unilateral 

754.31 Congenital dislocation of hip, bilateral 

754.32 Congenital subluxation of hip, unilateral 

755.20 Unspecified reduction deformity of upper limb 

755.21 Transverse deficiency of upper limb 

755.22 Longitudinal deficiency of upper limb, not elsewhere classified 

755.23 Longitudinal deficiency, combined, involving humerus, radius, and ulna (complete or 

incomplete) 

755.24 Longitudinal deficiency, humeral, complete or partial (with or without distal 

deficiencies, incomplete) 

755.25 Longitudinal deficiency, radioulnar, complete or partial (with or without distal 

deficiencies, incomplete) 

755.26 Longitudinal deficiency, radial, complete or partial (with or without distal deficiencies, 

incomplete) 

755.27 Longitudinal deficiency, ulnar, complete or partial (with or without distal deficiencies, 

incomplete) 

755.28 Longitudinal deficiency, carpals or metacarpals, complete or partial (with or without 

incomplete phalangeal deficiency) 

755.30 Unspecified reduction deformity of lower limb, 

755.4 Reduction deformities, unspecified limb 
 82

ICD-9-CM 

Code Diagnosis 

755.51 Congenital deformity of clavicle 

755.53 Radioulnar synostosis 

755.61 Coxa valga, congenital 

755.62 Coxa vara, congenital 

755.63 Other congenital deformity of hip (joint) 

756.50 Congenital osteodystrophy, unspecified 

800.00 Closed fracture of vault of skull without mention of intracranial injury, unspecified state 

of consciousness 

800.09 Closed fracture of vault of skull without mention of intracranial injury, with concussion, 

unspecified 

800.10 Closed fracture of vault of skull with cerebral laceration and contusion, unspecified state 

of consciousness 

800.19 Closed fracture of vault of skull with cerebral laceration and contusion, with concussion, 

unspecified 

800.20 Closed fracture of vault of skull with subarachnoid, subdural, and extradural hemorrhage, 

unspecified state of consciousness 

800.29 Closed fracture of vault of skull with subarachnoid, subdural, and extradural hemorrhage, 

with concussion, unspecified 

800.30 Closed fracture of vault of skull with other and unspecified intracranial hemorrhage, 

unspecified state of consciousness 

800.39 Closed fracture of vault of skull with other and unspecified intracranial hemorrhage, with 

concussion, unspecified 

800.40 Closed fracture of vault of skull with intracranial injury of other and unspecified nature, 

unspecified state of consciousness 

800.49 Closed fracture of vault of skull with intracranial injury of other and unspecified nature, 

with concussion, unspecified 

800.50 Open fracture of vault of skull without mention of intracranial injury, unspecified state of 

consciousness 

800.59 Open fracture of vault of skull without mention of intracranial injury, with concussion, 

unspecified 

800.60 Open fracture of vault of skull with cerebral laceration and contusion, unspecified state 

of consciousness 

800.69 Open fracture of vault of skull with cerebral laceration and contusion, with concussion, 

unspecified 

800.70 Open fracture of vault of skull with subarachnoid, subdural, and extradural hemorrhage, 

unspecified state of consciousness 

800.79 Open fracture of vault of skull with subarachnoid, subdural, and extradural hemorrhage, 

with concussion, unspecified 

800.80 Open fracture of vault of skull with other and unspecified intracranial hemorrhage, 

unspecified state of consciousness 

800.89 Open fracture of vault of skull with other and unspecified intracranial hemorrhage, with 

concussion, unspecified 

800.90 Open fracture of vault of skull with intracranial injury of other and unspecified nature, 

unspecified state of consciousness 

800.99 Open fracture of vault of skull with intracranial injury of other and unspecified nature, 

with concussion, unspecified 
 83

ICD-9-CM 

Code Diagnosis 

801.00 Closed fracture of base of skull without mention of intra cranial injury, unspecified state 

of consciousness 

801.09 Closed fracture of base of skull without mention of intra cranial injury, with concussion, 

unspecified 

801.10 Closed fracture of base of skull with cerebral laceration and contusion, unspecified state 

of consciousness 

801.19 Closed fracture of base of skull with cerebral laceration and contusion, with concussion, 

unspecified 

801.20 Closed fracture of base of skull with subarachnoid, subdural, and extradural hemorrhage, 

unspecified state of consciousness 

801.29 Closed fracture of base of skull with subarachnoid, subdural, and extradural hemorrhage, 

with concussion, unspecified 

801.30 Closed fracture of base of skull with other and unspecified intracranial hemorrhage, 

unspecified state of consciousness 

801.39 Closed fracture of base of skull with other and unspecified intracranial hemorrhage, with 

concussion, unspecified 

801.40 Closed fracture of base of skull with intracranial injury of other and unspecified nature, 

unspecified state of consciousness 

801.49 Closed fracture of base of skull with intracranial injury of other and unspecified nature, 

with concussion, unspecified 

801.50 Open fracture of base of skull without mention of intracranial injury, unspecified state of 

consciousness 

801.59 Open fracture of base of skull without mention of intracranial injury, with concussion, 

unspecified 

801.60 Open fracture of base of skull with cerebral laceration and contusion, unspecified state of 

consciousness 

801.69 Open fracture of base of skull with cerebral laceration and contusion, with concussion, 

unspecified 

801.70 Open fracture of base of skull with subarachnoid, subdural, and extradural hemorrhage, 

unspecified state of consciousness 

801.79 Open fracture of base of skull with subarachnoid, subdural, and extradural hemorrhage, 

with concussion, unspecified 

801.80 Open fracture of base of skull with other and unspecified intracranial hemorrhage, 

unspecified state of consciousness 

801.89 Open fracture of base of skull with other and unspecified intracranial hemorrhage, with 

concussion, unspecified 

801.90 Open fracture of base of skull with intracranial injury of other and unspecified nature, 

unspecified state of consciousness 

801.99 Open fracture of base of skull with intracranial injury of other and unspecified nature, 

with concussion, unspecified 

803.00 Other closed skull fracture without mention of intracranial injury, unspecified state of 

consciousness 

803.09 Other closed skull fracture without mention of intracranial injury, with concussion, 

unspecified 

803.10 Other closed skull fracture with cerebral laceration and contusion, unspecified state of 

consciousness 

803.19 Other closed skull fracture with cerebral laceration and contusion, with concussion, 

unspecified 
 84

ICD-9-CM 

Code Diagnosis 

803.20 Other closed skull fracture with subarachnoid, subdural, and extradural hemorrhage, 

unspecified state of consciousness 

803.29 Other closed skull fracture with subarachnoid, subdural, and extradural hemorrhage, with 

concussion, unspecified 

803.30 Other closed skull fracture with other and unspecified intracranial hemorrhage, 

unspecified state of unconsciousness 

803.39 Other closed skull fracture with other and unspecified intracranial hemorrhage, with 

concussion, unspecified 

803.40 Other closed skull fracture with intracranial injury of other and unspecified nature, 

unspecified state of consciousness 

803.49 Other closed skull fracture with intracranial injury of other and unspecified nature, with 

concussion, unspecified 

803.50 Other open skull fracture without mention of injury, unspecified state of consciousness 

803.59 Other open skull fracture without mention of intracranial injury, with concussion, 

unspecified 

803.60 Other open skull fracture with cerebral laceration and contusion, unspecified state of 

consciousness 

803.69 Other open skull fracture with cerebral laceration and contusion, with concussion, 

unspecified 

803.70 Other open skull fracture with subarachnoid, subdural, and extradural hemorrhage, 

unspecified state of consciousness 

803.79 Other open skull fracture with subarachnoid, subdural, and extradural hemorrhage, with 

concussion, unspecified 

803.80 Other open skull fracture with other and unspecified intracranial hemorrhage, 

unspecified state of consciousness 

803.89 Other open skull fracture with other and unspecified intracranial hemorrhage, with 

concussion, unspecified 

803.90 Other open skull fracture with intracranial injury of other and unspecified nature, 

unspecified state of consciousness 

803.99 Other open skull fracture with intracranial injury of other and unspecified nature, with 

concussion, unspecified 

804.00 Closed fractures involving skull or face with other bones, without mention of intracranial 

injury, unspecified state of consciousness 

804.09 Closed fractures involving skull of face with other bones, without mention of intracranial 

injury, with concussion, unspecified 

804.10 Closed fractures involving skull or face with other bones, with cerebral laceration and 

contusion, unspecified state of consciousness 

804.19 Closed fractures involving skull or face with other bones, with cerebral laceration and 

contusion, with concussion, unspecified 

804.20 Closed fractures involving skull or face with other bones with subarachnoid, subdural, 

and extradural hemorrhage, unspecified state of consciousness 

804.29 Closed fractures involving skull or face with other bones with subarachnoid, subdural, 

and extradural hemorrhage, with concussion, unspecified 

804.30 Closed fractures involving skull or face with other bones, with other and unspecified 

intracranial hemorrhage, unspecified state of consciousness 

804.39 Closed fractures involving skull or face with other bones, with other and unspecified 

intracranial hemorrhage, with concussion, unspecified 
 85

ICD-9-CM 

Code Diagnosis 

804.40 Closed fractures involving skull or face with other bones, with intracranial injury of other 

and unspecified nature, unspecified state of consciousness 

804.49 Closed fractures involving skull or face with other bones, with intracranial injury of other 

and unspecified nature, with concussion, unspecified 

804.60 Open fractures involving skull or face with other bones, with cerebral laceration and 

contusion, unspecified state of consciousness 

804.69 Open fractures involving skull or face with other bones, with cerebral laceration and 

contusion, with concussion, unspecified 

804.70 Open fractures involving skull or face with other bones with subarachnoid, subdural, and 

extradural hemorrhage, unspecified state of consciousness 

804.79 Open fractures involving skull or face with other bones with subarachnoid, subdural, and 

extradural hemorrhage, with concussion, unspecified 

804.80 Open fractures involving skull or face with other bones, with other and unspecified 

intracranial hemorrhage, unspecified state of consciousness 

804.89 Open fractures involving skull or face with other bones, with other and unspecified 

intracranial hemorrhage, with concussion, unspecified 

804.90 Open fractures involving skull or face with other bones, with intracranial injury of other 

and unspecified nature, unspecified state of consciousness 

804.99 Open fractures involving skull or face with other bones, with intracranial injury of other 

and unspecified nature, with concussion, unspecified 

806.00 Closed fracture of C1-C4 level with unspecified spinal cord injury 

806.05 Closed fracture of C5-C7 level with unspecified spinal cord injury 

806.10 Open fracture of C1-C4 level with unspecified spinal cord injury 

806.15 Open fracture of C5-C7 level with unspecified spinal cord injury 

806.20 Closed fracture of T1-T6 level with unspecified spinal cord injury 

806.25 Closed fracture of T7-T12 level with unspecified spinal cord injury 

806.30 Open fracture of T1-T6 level with unspecified spinal cord injury 

806.35 Open fracture of T7-T12 level with unspecified spinal cord injury 

806.60 Closed fracture of sacrum and coccyx with unspecified spinal cord injury 

806.70 Open fracture of sacrum and coccyx with unspecified spinal cord injury 

820.00 Closed fracture of intracapsular section of neck of femur, unspecified 

820.10 Open fracture of intracapsular section of neck of femur, unspecified 

820.30 Open fracture of trochanteric section of neck of femur, unspecified 

820.8 Closed fracture of unspecified part of neck of femur 

820.9 Open fracture of unspecified part of neck of femur 

839.10 Open dislocation, cervical vertebra, unspecified 

850.5 Concussion with loss of consciousness of unspecified duration 

851.00 Cortex (cerebral) contusion without mention of open intracranial wound, unspecified 

state of consciousness 

851.09 Cortex (cerebral) contusion without mention of open intracranial wound, with 

concussion, unspecified 

851.10 Cortex (cerebral) contusion with open intracranial wound, unspecified state of 

consciousness 

851.19 Cortex (cerebral) contusion with open intracranial wound, with concussion, unspecified 
 86

ICD-9-CM 

Code Diagnosis 

851.20 Cortex (cerebral) laceration without mention of open intracranial wound, unspecified 

state of consciousness 

851.29 Cortex (cerebral) laceration without mention of open intracranial wound, with 

concussion, unspecified 

851.30 Cortex (cerebral) laceration with open intracranial wound, unspecified state of 

consciousness 

851.39 Cortex (cerebral) laceration with open intracranial wound, with concussion, unspecified 

851.40 Cerebellar or brain stem contusion without mention of open intracranial wound, 

unspecified state of consciousness 

851.49 Cerebellar or brain stem contusion without mention of open intracranial wound, with 

concussion, unspecified 

851.50 Cerebellar or brain stem contusion with open intracranial wound, unspecified state of 

consciousness 

851.59 Cerebellar or brain stem contusion with open intracranial wound, with concussion, 

unspecified 

851.60 Cerebellar or brain stem laceration without mention of open intracranial wound, 

unspecified state of consciousness 

851.69 Cerebellar or brain stem laceration without mention of open intracranial wound, with 

concussion, unspecified 

851.70 Cerebellar or brain stem laceration with open intracranial wound, unspecified state of 

consciousness 

851.79 Cerebellar or brain stem laceration with open intracranial wound, with concussion, 

unspecified 

851.80 Other and unspecified cerebral laceration and contusion, without mention of open 

intracranial wound, unspecified state of consciousness 

851.89 Other and unspecified cerebral laceration and contusion, without mention of open 

intracranial wound, with concussion, unspecified 

851.90 Other and unspecified cerebral laceration and contusion, with open intracranial wound, 

unspecified state of consciousness 

851.99 Other and unspecified cerebral laceration and contusion, with open intracranial wound, 

with concussion, unspecified 

852.00 Subarachnoid hemorrhage following injury without mention of open intracranial wound, 

unspecified state of consciousness 

852.09 Subarachnoid hemorrhage following injury without mention of open intracranial wound, 

with concussion, unspecified 

852.10 Subarachnoid hemorrhage following injury with open intracranial wound, unspecified 

state of consciousness 

852.19 Subarachnoid hemorrhage following injury with open intracranial wound, with 

concussion, unspecified 

852.20 Subdural hemorrhage following injury without mention of open intracranial wound, 

unspecified state of consciousness 

852.29 Subdural hemorrhage following injury without mention of open intracranial wound, with 

concussion, unspecified 

852.30 Subdural hemorrhage following injury with open intracranial wound, unspecified state of 

consciousness 

852.39 Subdural hemorrhage following injury with open intracranial wound, with concussion, 

unspecified 
 87

ICD-9-CM 

Code Diagnosis 

852.40 Extradural hemorrhage following injury without mention of open intracranial wound, 

unspecified state of consciousness 

852.49 Extradural hemorrhage following injury without mention of open intracranial wound, 

with concussion, unspecified 

852.50 Extradural hemorrhage following injury with open intracranial wound, unspecified state 

of consciousness 

852.59 Extradural hemorrhage following injury with open intracranial wound, with concussion, 

unspecified 

853.00 Other and unspecified intracranial hemorrhage following injury without mention of open 

intracranial wound, unspecified state of consciousness 

853.09 Other and unspecified intracranial hemorrhage following injury without mention of open 

intracranial wound, with concussion, unspecified 

853.10 Other and unspecified intracranial hemorrhage following injury with open intracranial 

wound, unspecified state of consciousness 

853.19 Other and unspecified intracranial hemorrhage following injury with open intracranial 

wound, with concussion, unspecified 

854.00 Intracranial injury of other and unspecified nature without mention of open intracranial 

wound, unspecified state of consciousness 

854.09 Intracranial injury of other and unspecified nature without mention of open intracranial 

wound, with concussion, unspecified 

854.10 Intracranial injury of other and unspecified nature with open intracranial wound, 

unspecified state of consciousness 

854.19 Intracranial injury of other and unspecified nature with open intracranial wound, with 

concussion, unspecified 

887.0 Traumatic amputation of arm and hand (complete) (partial), unilateral, below elbow, 

without mention of complication 

887.1 Traumatic amputation of arm and hand (complete) (partial), unilateral, below elbow, 

complicated 

887.2 Traumatic amputation of arm and hand (complete) (partial), unilateral, at or above 

elbow, without mention of complication 

887.3 Traumatic amputation of arm and hand (complete) (partial), unilateral, at or above 

elbow, complicated 

887.4 Traumatic amputation of arm and hand (complete) (partial), unilateral, level not 

specified, without mention of complication 

887.5 Traumatic amputation of arm and hand (complete) (partial), unilateral, level not 

specified, complicated 

941.00 Burn of unspecified degree of face and head, unspecified site 

941.02 Burn of unspecified degree of eye (with other parts of face, head, and neck) 

941.09 Burn of unspecified degree of multiple sites [except with eye] of face, head, and neck 

942.00 Burn of unspecified degree of trunk, unspecified site 

942.01 Burn of unspecified degree of breast 

942.02 Burn of unspecified degree of chest wall, excluding breast and nipple 

942.03 Burn of unspecified degree of abdominal wall 

942.04 Burn of unspecified degree of back [any part] 

942.05 Burn of unspecified degree of genitalia 

942.09 Burn of unspecified degree of other and multiple sites of trunk 
 88

ICD-9-CM 

Code Diagnosis 

943.00 Burn of unspecified degree of upper limb, except wrist and hand, unspecified site 

943.01 Burn of unspecified degree of forearm 

943.02 Burn of unspecified degree of elbow 

943.03 Burn of unspecified degree of upper arm 

943.04 Burn of unspecified degree of axilla 

943.05 Burn of unspecified degree of shoulder 

943.06 Burn of unspecified degree of scapular region 

943.09 Burn of unspecified degree of multiple sites of upper limb, except wrist and hand 

943.30 Full-thickness skin [third degree, not otherwise specified] of upper limb, unspecified site 

943.40 Deep necrosis of underlying tissues [deep third degree] without mention of loss of a body 

part, of upper limb,unspecified site 

943.50 Deep necrosis of underlying tissues [deep third degree] with loss of a body part, of upper 

limb, unspecified site 

944.30 Full-thickness skin loss [third degree, not otherwise specified] of hand, unspecified site 

944.40 Deep necrosis of underlying tissues [deep third degree] without mention of loss of a body 

part, hand, unspecified site 

944.50 Deep necrosis of underlying tissues [deep third degree] with loss of a body part, of hand, 

unspecified site 

945.00 Burn of unspecified degree of lower limb [leg], unspecified site 

945.01 Burn of unspecified degree of toe(s) (nail) 

945.02 Burn of unspecified degree of foot 

945.03 Burn of unspecified degree of ankle 

945.04 Burn of unspecified degree of lower leg 

945.05 Burn of unspecified degree of knee 

945.06 Burn of unspecified degree of thigh [any part] 

945.09 Burn of unspecified degree of multiple sites of lower limb(s) 

945.20 Blisters, epidermal loss [second degree] of lower limb [leg], unspecified site 

945.40 Deep necrosis of underlying tissues [deep third degree] without mention of loss of a body 

part, lower limb [leg], unspecified site 

945.50 Deep necrosis of underlying tissues [deep third degree] with loss of a body part, of lower 

limb [leg], unspecified site 

949.4 Deep necrosis of underlying tissue [deep third degree] without mention of loss of a body 

part, unspecified 

949.5 Deep necrosis of underlying tissues [deep third degree] with loss of a body part, 

unspecified 

997.60 Unspecified complication of amputation stump 

VIII. Proposed Non-Quality Related Revisions to IRF-PAI Sections 

Under section 1886(j)(2)(D) of the Act, the Secretary is authorized to require 

rehabilitation facilities that provide inpatient hospital services to submit such data as the 
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Secretary deems necessary to establish and administer the prospective payment system under 

subsection P. The collection of patient data is indispensable for the successful development and 

implementation of the IRF payment system. In the August 7, 2001 final rule, the inpatient 

rehabilitation facility patient assessment instrument (IRF-PAI) was adopted as the standardized 

patient assessment instrument under the IRF prospective payment system (PPS). The IRF-PAI 

was established for, and is still used to gather data to classify patients for payment under the IRF 

PPS. As discussed in section XII. of this proposed rule, it is also now used to collect certain data 

for the IRF Quality Reporting Program. IRFs are currently required to complete an IRF-PAI for 

every Medicare Part A, B or C patient who is admitted to, or discharged from an IRF. 

Although there have been significant advancements in the industry, no IRF PPS paymentrelated changes have been made to the IRF-PAI form since its implementation - in FY 2002. We 

are proposing to amend certain response options, add additional data points, remove certain 

outdated items and change certain references to ensure that our policies reflect the current data 

needs of the IRF PPS program. 

A. Proposed Updates

We propose to amend the response codes on the following items in the IRF-PAI: 

● Item 15A: Admit From (Formerly item 15) 

● Item 16A: Pre-Hospital Living Situation (Formerly item 16) 

● Item 44D: Patient’s Discharge Destination/Living Setting (Formerly item 44A) 

To minimize possible confusion due to the use of different sets of status codes on the 

IRF-PAI and the CMS-1450 (also referred to as the UB-04) claim form, we believe that the IRFPAI status codes should be changed to mirror those used on the CMS-1450 claim form. We 

believe this proposed update would help decrease the rate of coding errors on CMS-1450 claim 
 90

forms. We believe this proposal would provide response options that mirror another commonly 

used instrument in the Medicare context allowing providers to use only one common set of 

response codes. We propose to amend the response options for the three items listed above to: 

● 01- Home (private home/apt., board/care, assisted living, group home) 

● 02- Short-term General Hospital 

● 03- Skilled Nursing Facility (SNF) 

● 50- Hospice 

● 62- Another Inpatient Rehabilitation Facility 

● 63- Long-Term Care Hospital (LTCH) 

● 64- Medicaid Nursing Facility 

● 65- Inpatient Psychiatric Facility 

● 66- Critical Access Hospital 

● 99- Not Listed 

We also propose to update the options for responding to item 20B: Secondary Source. 

We find that the current response options for this data element exceed what we need to operate 

IRF PPS. Therefore, to decrease burden on IRFs through the implementation of simplified 

response options, we propose to limit secondary source response options to the following: 

● 02- Medicare- Fee for Service 

● 51- Medicare- Medicare Advantage 

● 99- Not Listed 

B. Proposed Additions

Further, we propose to add (or expand) the following items to the IRF-PAI: 

● Item 25A: Height 
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● Item 26A: Weight 

● Item 24: Comorbid Conditions (15 additional spaces) 

● Item 44C: Was the patient discharged alive? 

● Signature of Persons Completing the IRF-PAI 

Items“25A: Height” and “26A: Weight,” are important items to collect for use in the 

classification of facilities for payment under the IRF-PPS as well as for the risk adjustment of 

quality measures (as described in section XII. of this proposed rule). In the regulations at 

§412.29(b)(2), we specify a list of comorbid conditions that, if certain conditions are met, may 

qualify a patient for inclusion in an IRF’s 60 percent rule compliance percentage. For example, a 

patient with a lower-extremity joint replacement comorbidity would qualify if the patient had a 

bilateral joint replacement, is over the age of 85, and/or has a BMI greater than 50. BMI is 

calculated using height and weight. As such, by adding a patients’ height and weight 

information to the IRF-PAI we expect that the FI/MAC will be able, upon medical review, to 

include these patients in a facilities’ 60 percent rule compliance percentage in accordance with 

chapter 3, §140.14 of the Medicare Claims Processing Manual (Pub. 100.4), after it has 

confirmed any other severity and prior treatment requirements that may apply. 

We also propose adding 15 additional spaces for providers to document patients’ 

comorbid medical conditions at item 24: Comorbid Conditions (located in the medical 

information section of the IRF-PAI). The IRF-PAI currently has ten spaces available for 

providers to enter ICD codes for comorbid conditions. If finalized, the IRF-PAI would have a 

total of 25 spaces. Such expansion would support IRFs as they seek to code with greater 

specificity to support presumptive compliance percentage findings, and would be in keeping with 

recent industry-driven changes. 
 92

In response to the industry’s request to update the claim form to allow for better 

accounting for patients comorbidities, added 15 additional spaces were added to the claim form 

for providers to document ICD codes. We believe that the number of data elements allowed on 

the IRF-PAI should mirror the number allowed on the claim. Additionally, the ICD-10 coding 

scheme, which will be used beginning on October 1, 2014 is much more specific than the current 

ICD-9 coding. Therefore, when the agency moves from ICD-9 to ICD-10 coding, providers may 

need the additional spaces to code because of the greater specificity under ICD-10. 

Furthermore, we propose to add a new item 44C: “Was the patient discharged alive?” to 

the discharge information section on the IRF-PAI. Adding this item as a standalone item would 

allow facilities that reply “no” to 44C to skip items 44D, 44E, and 45, which describe a living 

patient’s discharge destination. This will reduce the burden on the time it takes to complete the 

IRF-PAI. Facilities that respond “yes” to item 44C will complete items 44D, 44E and 45 as they 

apply to the patient. We believe that adding this question as a standalone item would provide 

greater clarity for providers when documenting patient information on the IRF-PAI. 

We propose adding a page to the IRF-PAI dedicated as the signature page for persons 

completing the IRF-PAI. As of the effective date of the IRF Coverage Requirements, see the 

August 7, 2009 FY 2010 IRF PPS final rule (74 FR 39762), the IRF-PAI forms must be 

maintained in the patient’s medical record at the IRF (either in electronic or paper format), and 

information in the IRF-PAI must correspond with all of the information provided in the patient’s 

IRF medical record. We received multiple public comments on the FY 2010 IRF PPS proposed 

rule regarding the requirement to include that IRF-PAI in the medical record questioning 

whether IRFs would need to adhere to the conditions of participation in §482.24(c)(1) that 

require all patient medical record entries must be legible, complete, dated, timed, and 
 93

authenticated in written or electronic form by the person responsible for providing or evaluating 

the service provided, consistent with hospital policies and procedures. When CMS responded (at 

http://cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Downloads/IRF-Training-call_version_1.pdf) that IRFs would 

need to adhere to §482.24(c)(1), providers responded by asking for a place on the IRF-PAI 

where they would be able to document the required authentication. The proposed addition of a 

page for signatures of persons completing the IRF-PAI would fulfill providers’ request to have 

an organized way to document who in the IRF has completed the assessment of the patient and 

when that assessment took place. We also believe that having a signature page for those 

completing the IRF-PAI will ensure that providers are satisfying both the IRF coverage 

requirements and the conditions of participation requirements. 

C. Proposed Deletions 

We propose to delete the following items from the IRF-PAI: 

● Item 18: Pre-Hospital Vocational Category 

● Item 19: Pre-Hospital Vocational Effort 

● Item 25: Is patient comatose at admission? 

● Item 26: Is patient delirious at admission? 

● Item 28: Clinical signs of dehydration 

We no longer believe that these items are necessary and in the interest of reducing burden 

on providers we would like to delete them. 

Items 18: Pre-Hospital Vocational Category and 19: Pre-Hospital Vocational Effort 

(which are currently located in the admission identification section on the IRF-PAI) are not used 

for payment or quality purposes. While these items will, if finalized, be dropped from the IRF-
 94

PAI form, however, we would note that these data elements could be significant in a treatment 

context, in which case we would expect them to appear in the patient’s medical record. For 

example, we believe that these data elements could be relevant during the care 

planning/discharge process as well as during interdisciplinary team meetings. 

We also note, that items 25: Is patient comatose at admission, 26: Is patient delirious at 

admission, and 28: Clinical signs of dehydration (which are currently located in the medical 

information section on the IRF-PAI) are voluntary items that are not used for our payment or 

quality program purposes. Therefore, we do not believe it is necessary to collect this information 

on the IRF-PAI. Furthermore, to the extent such information would be relevant to the provision 

of patient care; this information should be captured in either the transfer documentation from the 

referring physician, or the patients’ initial assessment documentation. As such, continuing to 

require this information on the IRF-PAI would be duplicative since the items should be well 

documented in the patients’ medical record from their stay at the facility. 

D. Proposed Changes

We are proposing to replace all references to the ICD-9-CM code(s) in the IRF-PAI with 

references to ICD code(s). This change would allow CMS to forgo making additional changes to 

the IRF-PAI when the adopted ICD code(s) change. 

Proposed Technical Correction 

We are proposing a technical correction at items 44D, 44E and 45 to conform to the 

additions proposed above. We believe that adding language to these items indicating that the 

question can be skipped depending upon how item 44C is answered, will help reduce submission 

errors for providers when filling out the IRF-PAI. 
 95

A draft of the IRF-PAI, with the proposed revisions discussed throughout this proposed 

rule is available for download on the IRF PPS website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html . 

IX. Proposed Technical Corrections to the Regulations at §412.130 

In the FY 2012 IRF PPS final rule (76 FR 47869 through 47873), we revised the 

regulations for inpatient rehabilitation facilities at §412.23(b), §412.25(b), §412.29, and §412.30 

to update and simplify the policies, to eliminate unnecessary repetition and confusion, and to 

enhance consistency with the IRF coverage requirements. Among other revisions, we removed 

the regulations that were formerly in §412.30, and revised and consolidated the requirements 

regarding “new” IRFs and “new” IRF beds that previously existed in §412.30 into the revised 

regulations at §412.29(c). However, we have recently discovered that §412.130, which outlines 

the policies regarding retroactive adjustments for incorrectly excluded hospitals and units, was 

not updated to reflect the changes to §412.30 and §412.29. Specifically, §412.130 still 

references regulations in §412.30 that were revised and consolidated into §412.29(c). Further, it 

still references regulations that were formerly in §412.23(b)(2), but were moved into §412.29(b) 

in the FY 2012 IRF PPS final rule (76 FR 47869 through 47873). 

 Thus, in this proposed rule, we propose to make the following technical corrections to the 

regulations in §412.130 to conform with the revisions to the regulations in §412.23(b), §412.29, 

and §412.30 that were implemented in the FY 2012 IRF PPS final rule (76 FR 47869 through 

47873): 

• Replace the current reference to “§412.23(b)(8)” in §412.130(a)(1) with the new 

reference to §412.29(c), 
 96

• Replace all of the current references to “§412.23(b)(2)” in §412.130(a)(1), (2), 

and (3) with the new reference to §412.29(b), 

• Replace the current reference to “§412.30(a)” in §412.130(a)(2) with the new 

reference to §412.29(c), and 

• Replace the current reference to “§412.30(c)” in §412.130(a)(3) with the new 

reference to §412.29(c). 

X. Proposed Revisions to the Conditions of Payment for IRF Units Under the IRF PPS 

The regulations at §412.25 specify the requirements for an IRF unit to be excluded from 

the inpatient prospective payment system (IPPS) specified in §412.1(a)(1) and to instead be paid 

under the IRF PPS specified in §412.1(a)(3). The requirements at §412.25 are unique to IRF 

units of hospitals, whereas the requirements at §412.29 apply to both freestanding IRF hospitals 

and IRF units of hospitals. Among the requirements at §412.25 is the requirement (at 

§412.25(a)(1)(iii)) that the institution of which the IRF unit is a part must have “enough beds that 

are not excluded from the prospective payment systems to permit the provision of adequate cost 

information, as required by §413.24(c) of this chapter.” We have not previously specified how 

many such beds the hospital, of which the IRF unit is a part, must have to meet this requirement. 

However, we have recently received questions from providers about whether one or two hospital 

beds that are certified for payment under the IPPS, in some cases beds that are rarely used for 

patient care, would meet the requirement at §412.25(a)(1)(iii). We believe this does not meet the 

requirement at §412.25(a)(1)(iii), which provides for the hospital of which the IRF unit is a part 

to be an IPPS hospital, which we believe is not demonstrated by the presence of just one or two 

hospital beds. 

Further, we are unclear how the IRF unit that is part of a hospital with only one or two 
 97

beds would be able to meet another requirement, at §412.25(a)(7), that specifies that an IRF unit 

must have beds that are “physically separate from (that is, not commingled with) the hospital’s 

other beds.” The requirement at §412.25(a)(7) means that there is some sort of physical 

separation (such as a different floor, a different wing, and different building, etc.) that separates 

the IRF unit from the rest of the hospital beds. We believe that it is unlikely that this 

requirement would be met in the situation in which the hospital of which the IRF unit is a part 

only has one or two beds, in some cases beds that are rarely used for patient care. 

Thus, we propose to specify at §412.25(a)(1)(iii) a minimum number of hospital beds that 

the IPPS hospital must have to meet the requirements at §412.25(a)(1)(iii) for having an IRF 

unit. We note that, though §412.25(a)(1)(iii) also applies to inpatient psychiatric facilities 

(IPFs), these facilities have their own requirements at§412.27 for payment under the IPF PPS 

that we are not proposing to change in this proposed rule. IPFs should continue following the 

regulations at §412.27. 

We propose to specify in §412.25(a)(1)(iii) that the institution of which the IRF unit is a 

part must have at least 10 staffed and maintained hospital beds that are not excluded from the 

IPPS, or at least 1 staffed and maintained hospital bed for every 10 certified IRF beds, whichever 

number is greater. If the institution is not able to meet this proposed requirement, then we 

propose that the IRF unit should instead be classified as an IRF hospital. We also propose to 

exclude CAHs that have IRF units from these requirements, as CAHs already have very specific 

bed size restrictions. We welcome stakeholder comments on the specific minimum hospital bed 

requirements for IRFs that we are proposing in this rule. 

XI. Proposed Clarification of the Regulations at §412.630 

In the original rule establishing a prospective payment system for Medicare payment of 
 98

inpatient hospital services provided by a rehabilitation hospital or by a rehabilitation unit of a 

hospital, we stated that that there would be no administrative or judicial review, under sections 

1869 and 1878 of the Act or otherwise, of the establishment of case-mix groups, the 

methodology for the classification of patients within these groups, the weighting factors, the 

prospective payment rates, outlier and special payments and area wage adjustments. See 

66 FR 41316, 41319 (August 7, 2001). Our intent was to honor the full breadth of the preclusion 

of administrative or judicial review provided by section 1886(j)(8) of the Act. However, the 

regulatory text reflecting the preclusion of review has been at times improperly interpreted to 

allow review of adjustments authorized under section 1886(j)(3)(v) of the Act. Because we 

interpret the preclusion of review at section 1886(j)(8) of the Act to apply to all payments 

authorized under section 1886(j)(3) of the Act, we do not believe that there should be 

administrative or judicial review of any part of the prospective rate. Accordingly, we are 

proposing to clarify our regulation at §412.630 by deleting the word “unadjusted” so that the 

regulation would clearly preclude review of “the Federal per discharge payment rates.” This 

clarification will better conform the regulation to the statutory language. 

As such, in accordance with sections 1886(j)(7)(A), (B), and (C) of the Act, we are 

proposing to revise the regulations at § 412.630 to clarify that administrative or judicial review 

under sections 1869 or 1878 of the Act, or otherwise, is prohibited with regard to the 

establishment of the methodology to classify a patient into the case-mix groups and the 

associated weighting factors, the federal per discharge payment rates, additional payments for 

outliers and special payments, and the area wage index. 

XII. Proposed Revision to the Regulations at §412.29 

According to the regulations at §412.29(d), to be excluded from the inpatient prospective 
 99

payment system (IPPS) and instead be paid under the IRF PPS, a facility must “have in effect a 

preadmission screening procedure under which each prospective patient’s condition and medical 

history are reviewed to determine whether the patient is likely to benefit significantly from an 

intensive inpatient hospital program. This procedure must ensure that the preadmission 

screening is reviewed and approved by a rehabilitation physician prior to the patient’s admission 

to the IRF.” The latter sentence of this regulation is based on the preadmission screening 

requirement for Medicare coverage of IRF services in §412.622(a)(4)(i)(D). The requirement 

was repeated in both places for consistency. 

However, in §412.622(a)(4)(i)(D), we specify that this requirement applies to patients 

“for whom the IRF seeks payment” from Medicare. We believe that the analogous requirement 

in §412.29(d) should also clearly state that it applies only to patients for whom the IRF is seeking 

payment directly from Medicare. Other payer sources, such as private insurance, have their own 

IRF admission requirements, and we do not believe that it would be appropriate to interfere with 

or duplicate the requirements that other payer sources may already have in place. Thus, we 

propose to amend §412.29(d) to clarify that the IRF’s preadmission screening procedure must 

ensure that the preadmission screening for a Medicare Part A fee-for-service patient is reviewed 

and approved by a rehabilitation physician prior to the patient’s admission to the IRF. We 

continue to believe that the basic preadmission screening procedure itself is an important element 

of providing quality IRF care to all patients and, thus, we propose to require that the basic 

preadmission screening procedure requirement remain in place for all patients regardless. 

XIII. Proposed Revisions and Updates to the Quality Reporting Program for IRFs 

A. Background and Statutory Authority

 Section 3004(b) of the Affordable Care Act added section 1886(j)(7) to the Act, which 
 100

requires the Secretary to implement a quality reporting program (QRP) for IRFs. This program 

applies to freestanding IRF hospitals, IRF units that are affiliated with an acute care facility, and 

IRF units affiliated with a critical access hospital (CAH). 

 Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the reduction of the 

applicable IRF PPS annual increase factor, as previously modified under section 1886(j)(3)(D) of 

the Act, by 2 percentage points for any IRFs that fail to submit data to the Secretary in 

accordance with requirements established by the Secretary for that fiscal year. Section 

1886(j)(7)(A)(ii) of the Act notes that this reduction may result in the increase factor being less 

than 0.0 for a fiscal year, and in payment rates under this subsection for a fiscal year being less 

than the payment rates for the preceding fiscal year. Any reduction based on failure to comply 

with the reporting requirements is, in accordance with section 1886(j)(7)(B) of the Act, limited to 

the particular fiscal year involved. The reductions are not to be cumulative and will not be taken 

into account in computing the payment amount under subsection (j) for a subsequent fiscal year. 

 Section 1886(j)(7)(C) of the Act requires that each IRF submit data to the Secretary on 

quality measures specified by the Secretary. The required quality measure data must be 

submitted to the Secretary in a form, manner and time, specified by the Secretary. 

 The Secretary is generally required to specify measures that have been endorsed by the 

entity with a contract under section 1890(a) of the Act. This contract is currently held by the 

National Quality Forum (NQF), which is a voluntary consensus standard-setting organization. 

The NQF was established to standardize health care quality measurement and reporting through 

its consensus development process. 

 We have generally adopted NQF-endorsed measures in our reporting programs. 

However, section 1886(j)(7)(D)(ii) of the Act provides that “in the case of a specified area or 
 101

medical topic determined appropriate by the Secretary for which a feasible and practical measure 

has not been endorsed by the entity with a contract under section 1890(a) of the Act, the 

Secretary may specify a measure that is not so endorsed, so long as due consideration is given to 

measures that have been endorsed or adopted by a consensus-based organization identified by 

the Secretary.” Under section 1886(j)(7)(D)(iii) of the Act, the Secretary was required to publish 

the selected measures that will be applicable to the FY 2014 IRF PPS no later than 

October 1, 2012. 

 Section 1886(j)(7)(E) of the Act requires the Secretary to establish procedures for 

making data submitted under the IRF QRP available to the public. The Secretary must ensure 

that each IRF is given the opportunity to review the data that is to be made public prior to the 

publication or posting of this data. 

We seek to promote higher quality and more efficient health care for all patients who 

receive care in acute and post-acute care settings. Our efforts are, in part, effectuated by quality 

reporting programs coupled with the public reporting of data collected under those programs. 

The initial framework of the IRF QRP was established in the FY 2012 IRF PPS final rule 

(76 FR 47873). 

B. Quality Measures Previously Finalized and Currently in Use for the IRF Quality 

Reporting Program 

1. Background 

In the FY 2012 IRF PPS final rule, we adopted applications of 2 quality measures for use 

in the first data reporting cycle of the IRF QRP: (1) an application of “Catheter-Associated 

Urinary Tract Infection [CAUTI] for Intensive Care Unit Patients”1

 (NQF#0138); and (2) an 

 

1 The version of the CAUTI measure that was adopted in the FY 2012 IRF PPS final rule (76 FR 47874 through 47876) was 
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application of “Percent of Residents with Pressure Ulcers that Are New or Worsened (shortstay)” (NQF #0678). We adopted applications of these two measures because neither of them, at 

the time, was endorsed by the NQF for the IRF setting. We also discussed our plans to propose a 

30-Day All Cause Risk Standardized Post IRF Discharge Hospital Readmission Measure at a 

later date (76 FR 47874 through 47878). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45193 through 45196), we proposed: 

(1) to adopt updates to the CAUTI measure that had been adopted by NQF after we had adopted 

an application of the prior version of the measure for the IRF QRP; (2) to adopt a policy that 

would allow any measure adopted for use in the IRF QRP to remain in effect until the measure 

was actively removed, suspended, or replaced (we also proposed to apply this proposal to the 

CAUTI and pressure ulcer measures that had already been adopted for use in the IRF QRP); and 

(3) to utilize a subregulatory process to incorporate NQF updates to IRF quality measure 

specifications that do not substantively change the nature of the measure. We also informed 

stakeholders that CMS had submitted an ad hoc request for NQF review of the pressure ulcer 

measure with a request to endorse the measure’s use in two additional care settings -- Long-Term 

Care Hospitals (LTCHs) and IRFs. Assuming that the review resulted in no substantive changes 

to the pressure ulcer measure, we noted that, if adopted, we would use the proposed 

subregulatory process to incorporate any NQF updates and revisions to the pressure ulcer 

measure specifications for the IRF QRP Program (77 FR 45196 ). 

In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we adopted the 

 

titled ‘‘Catheter-Associated Urinary Tract Infection [CAUTI] Rate Per 1,000 Urinary Catheter Days for ICU patients. However, 

shortly after the FY 2012 IRF PPS final rule was published, this measure was submitted by the CDC (measure steward) to the 

NQF for a measure maintenance review, The CDC asked for changes to the measure, including expansion of the scope of the 

measure to non-ICU patient care locations and additional healthcare facility settings, including IRFs. The name of the measure 

was changed to reflect the character of the revised CAUTI measure. This measure is now titled ‘‘National Health Safety Network 

(NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome Measure.’’ 
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policies and measures as proposed, with one exception. At the time of the CY 2013 OPPS/ASC 

final rule, the NQF had endorsed the pressure ulcer measure for the IRF setting, and re-titled it to 

cover both residents and patients within LTCH and IRF settings, in addition to the Nursing 

Home/Skilled Nursing Facility setting. Although the measure had been expanded to the IRF 

setting, we concluded that it was not possible to adopt the NQF endorsed measure “Percent of 

Residents or Patients with Pressure Ulcers That Are New or Worsened (short-stay)” (NQF 

#0678). Public comments revealed that the “Quality Indicator” section of the IRF-PAI did not 

contain the data elements that would be needed to calculate a risk-adjusted measure. As a result, 

we decided to: (1) adopt an application of NQF #0678 that was a non-risk-adjusted pressure 

ulcer measure (numerator and denominator data only); (2) collect the data required for the 

numerator and the denominator using the current version of the IRF–PAI; (3) delay public 

reporting of pressure ulcer measure results until we could amend the IRF-PAI to add the data 

elements necessary for risk-adjusting NQF #0678, and then (4) adopt the NQF- endorsed 

version of the measure covering the IRF setting through rulemaking (77 FR 68507). 

2. Previously Finalized IRF QRP Quality Measures 

i. National Healthcare Safety Network (NHSN) Catheter Associated Urinary Tract 

Infection (CAUTI) Outcome Measure (NQF #0138) 

In the FY 2013 OPPS/ASC final rule we adopted the current version of NQF #0138 

NHSN Catheter Associated Urinary Tract Infection (CAUTI) Outcome Measure (replacing an 

application of this measure which we initially adopted in the FY 2012 IRF PPS (76 FR 47874 

through 47886)). The NQF endorsed measure applies to the FY 2015 IRF PPS annual increase 

factor and all subsequent payment determinations (77 FR 68504 through 68505). 

Since the publication of the FY 2013 OPPS/ASC final rule, the NHSN CAUTI measure 
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has not changed. Furthermore, we have not removed, suspended, or replaced this measure and it 

remains an active part of the IRF QRP. Additional information about this measure can be found 

at http://www.qualityforum.org/QPS/0138. Our procedures for data submission for this measure 

have also remained the same. IRFs should continue to submit their CAUTI measure data to the 

Centers for Disease Control and Prevention (CDC) NHSN. Details regarding submission of IRF 

CAUTI data to NHSN can be found at the NHSN website at http://www.cdc.gov/nhsn/inpatientrehab/index.html. 

ii. Application of Percent of Residents or Patients with Pressure Ulcers That Are New or 

Worsened (short-stay) (NQF #0678) 

In the CY 2103 OPPS/ASC final rule (77 FR 68500 through 68507) we finalized 

adoption of a non-risk-adjusted application of this measure using the current version of the IRFPAI. We also stated that we would not begin public reporting of this measure until we had 

adopted the NQF-endorsed version of this measure. To adopt the NQF-endorsed version of this 

measure, we had to update the existing IRF-PAI to include the additional data elements 

necessary to risk adjust this measure. We also delayed public reporting of pressure ulcer 

measure results until we could use notice and comment rulemaking to amend the IRF-PAI to add 

the data elements necessary for risk adjusting NQF #0678 (77 FR 68507). We are not proposing 

any changes to the application of measure #0678 finalized in the FY 2013 OPPS/ASC final rule 

for the FY 2015 and FY 2016 IRF PPS annual increase factor. Furthermore, we have not 

removed, suspended, or replaced this measure and it remains an active part of the IRF QRP. 

Additional information about this measure can be found at 

http://www.qualityforum.org/QPS/0678. Our procedures for data submission for this measure 

also have remained the same. IRFs should continue to collect and submit pressure ulcer measure 
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data during CY 2013 using the IRF-PAI released on October 1, 2012 for the FY 2015 IRF PPS 

annual increase factor. Further, IRFs should continue to collect and submit pressure ulcer 

measure data during the first three quarters of CY 2014 using the IRF-PAI released on October 

1, 2012 for the FY 2016 IRF PPS annual increase factor. 

However, we propose to adopt a revised version of the IRF-PAI starting October 1, 2014. 

This revised version of the IRF-PAI would allow collection of data elements necessary for risk 

adjustment of NQF #0678; therefore, we are proposing to adopt the NQF #0678 as specified (for 

example, including risk-adjustment) for the FY 2017 payment determination and subsequent 

fiscal year payment determinations. 

TABLE 8: Quality Measures Finalized in the CY 2013 OPPS/ASC Final Rule 

Affecting the FY 2015 IRF Annual Increase Factor and Subsequent Year Increase Factors

NQF Measure ID Measure Title 

NQF #0138 National Health Safety Network (NHSN) Catheter-associated Urinary 

Tract Infection (CAUTI) Outcome Measure+

Application of 

NQF #0678 

Percent of Residents or Patients with Pressure Ulcers That are New or 

Worsened (Short-Stay)* +

 Using CDC/NHSN 

*

Using October 1, 2012 release of IRF-PAI

C. Proposed New IRF QRP Quality Measures Affecting the FY 2016 and FY 2017 IRF PPS

Annual Increase Factor, and Subsequent Year Increase Factors 

1. General Considerations Used For Selection of Quality Measures for the IRF QRP 

The successful development of an IRF quality reporting program that promotes the 

delivery of high quality healthcare services in IRFs is our paramount concern. We seek to adopt 

measures for the IRF QRP that promote better, safer, and more efficient care. Our measure 

selection activities for the IRF QRP must take into consideration input we receive from a multistakeholder group, the Measure Applications Partnership (MAP), which is convened by the NQF 

as part of a pre-rulemaking process that we have established and are required to follow under 
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section 1890A of the Act. The MAP is a public-private partnership comprised of multistakeholder groups convened by the NQF for the primary purpose of providing input to CMS on 

the selection of certain categories of quality and efficiency measures, as required by section 

1890A(a)(3) of the Act. By February 1st of each year, the NQF must provide MAP input to 

CMS. We have taken the MAP’s input into consideration in selecting measures for this proposed 

rule. Input from the MAP is located at 

http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.a

spx. For more details about the pre-rulemaking process, see the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53376). 

 We also take into account national priorities, such as those established by the National 

Priorities Partnership (NPP) at http://www.qualityforum.org/npp/, the HHS Strategic Plan

http://www.hhs.gov/secretary/about/priorities/priorities.html and the National Strategy for 

Quality Improvement in Healthcare located at 

(http://www.healthcare.gov/news/reports/nationalqualitystrategy032011.pdf). 

To the extent practicable, we have sought to adopt measures that have been endorsed by a 

national consensus organization, recommended by multi-stakeholder organizations, and 

developed with the input of providers, purchasers/payers, and other stakeholders. 

For the FY 2016 IRF PPS annual increase factor, in addition to retaining the previously 

discussed CAUTI and Pressure Ulcer measures, we are proposing to adopt one new measure: 

Influenza Vaccination Coverage among Healthcare Personnel Measure (NQF #0431). For the 

FY 2017 IRF PPS annual increase factor we are proposing to adopt three quality measures: (1) 

All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Inpatient 

Rehabilitation Facilities, (2) Percent of Residents or Patients Who Were Assessed and 
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Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680), and (3) the 

NQF endorsed version of Percent of Residents or Patients with Pressure Ulcers that are New or 

Worsened (Short-Stay) (NQF #0678). We discuss each in turn below. 

2. New Quality Measures Proposed for Quality Data Reporting Affecting the FY 2016 IRF 

PPS Annual Increase Factor 

i. Proposed IRF QRP Measure #1: Influenza Vaccination Coverage among Healthcare 

Personnel (NQF #0431) 

We propose to adopt the CDC developed Influenza Vaccination Coverage among 

Healthcare Personnel (NQF #0431) measure that is currently collected by the CDC via the 

NHSN. This measure reports on the percentage of health care personnel who receive the 

influenza vaccination. This measure was included on the CMS’ List of Measures under 

Consideration for December 1, 2012 that CMS made publicly available. The measure was 

reviewed by the MAP and was included in the MAP input that was transmitted to CMS on 

February 1, 2013, as required by section 1890A(a)(3) of the Act. The MAP fully supported the 

use of this measure in the IRF setting, indicating it promotes alignment across quality reporting 

programs (for example, with Long-Term Care Hospital Quality Reporting Program (LTCHQR 

Program) and Hospital Inpatient Quality Reporting Program (Hospital IQR)) and addresses a 

core measure concept.

Health care personnel are at risk for both acquiring influenza from patients and 

transmitting it to patients, and health care personnel often come to work when ill.2 One early 

report of health care personnel influenza infections during the 2009 H1N1 influenza pandemic 

estimated 50 percent of infected health care personnel had contracted the influenza virus from 

 

2 Wilde JA, McMillan JA, Serwint J, et al. Effectiveness of influenza vaccine in healthcare professionals: A randomized trial. JAMA. 1999; 281: 

908–913.
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patients or coworkers in the healthcare setting.3

The CDC Advisory Committee on Immunization Practices (ACIP) guidelines 

recommend that all health care personnel get an influenza vaccine every year to protect 

themselves and patients.4 Even though levels of influenza vaccination among health care 

personnel have slowly increased over the past 10 years, less than 50 percent of health care 

personnel each year received the influenza vaccination until the 2009 and 2010 seasons, when an 

estimated 62 percent of health care personnel got a seasonal influenza vaccination. In the 2010 

and 2011 season, 63.5 percent of health care personnel reported influenza vaccination. Increased 

influenza vaccination coverage among health care personnel is expected to result in reduced 

morbidity and mortality related to influenza virus infection among patients, aligning with the 

NQS’s aims of better care and healthy people/communities. This measure has been finalized for 

reporting in the Hospital IQR Program, LTCHQR Program, and the Ambulatory Surgical Center 

Quality Reporting Program (ASCQR Program). 

We refer readers to the NHSN Manual, Healthcare Personnel Safety Component Protocol 

Module, Influenza Vaccination and Exposure Management Modules, which is available at the 

CDC website at http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html for measure 

specifications and additional details. 

We propose that, for the IRF QRP, the Influenza Vaccination Coverage Among 

Healthcare Personnel measure (NQF #0431) have its own reporting period to align with the 

influenza vaccination season, which is defined by the CDC as October 1st (or when the vaccine 

becomes available) through March 31st. IRFs will submit their data for this measure to the 

 

3 Harriman K, Rosenberg J, Robinson S, et al. Novel influenza A (H1N1) virus infections among health-care personnel—United States, April–

May 2009. MMWR Morb Mortal Wkly Rep. 2009; 58(23): 641–645.

4 Fiore AE, Uyeki TM, Broder K, et al. Prevention and control of influenza with vaccines: Recommendations of the Advisory Committee on 

Immunization Practices (ACIP), 2010. MMWR Recomm Rep. 2010. 59(08): 1–62.
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NHSN (http://www.cdc.gov/nhsn/). It is a secure Internet based surveillance system maintained 

by the CDC, and can be utilized by all types of health care facilities in the United States, 

including IRFs. NHSN collects data via a web based tool hosted by the CDC. Information on 

the NHSN system, including protocols, report forms, and guidance documents can be found at 

the provided web link: http://www.cdc.gov/nhsn/. NHSN will submit data to CMS on behalf of 

the facility. 

For the FY 2016 IRF PPS annual increase factor, we propose that the data collection will 

cover the period from October 1, 2014 (or when the vaccine becomes available) through March 

31, 2015. Details related to the use of NHSN for data submission and information on definitions, 

numerator data, denominator data, data analyses, and measure specifications for the Influenza 

Vaccination Coverage among Healthcare Personnel (NQF #0431) measure can be found at 

http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html. Because IRFs are already using 

the NHSN for the submission of CAUTI data, the administrative burden related to data collection 

and submission for this measure under the IRF QRP should be minimal. 

While IRFs can enter information in NHSN at any point during the influenza season for 

NQF #0431, data submission is only required once per influenza season, unlike the other 

measure finalized for the IRF QRP that utilizes NHSN (CAUTI measure NQF #0138). For 

example, IRFs can choose to submit influenza vaccination data on a monthly basis. However, 

each time an IRF submits these data, it will be asked to provide a cumulative total of 

vaccinations for the “current” influenza season. Thus, entering this information at the end of the 

influenza season would yield the same total number of vaccinations. The NHSN system will not 

track the individual number of vaccinations on a monthly basis, but, rather, will track the 

cumulative total of vaccinations for the “current” influenza season. We propose that the final 
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deadline associated with this measure align with another CMS deadline for IRF HAI reporting 

into NHSN, which is May 15th. IRF QRP data collection timelines and submission deadlines are 

discussed below. 

Also, we note that data collection for this measure is not 12 months, as with other 

measures, but is approximately 6 months (October 1 (or when the vaccine becomes available) 

through March 31 of the following year). We note that this data collection period is applicable 

only to NQF #0431 Influenza Vaccination Coverage Among Healthcare Personnel, and not 

applicable to any other IRF QRP measures, proposed or adopted, unless explicitly stated. The 

measure specifications for this measure can be found at http://www.cdc.gov/nhsn/inpatientrehab/hcp-vacc/index.html and at http://www.qualityforum.org/QPS/0431.

We are seeking comments on the proposed use of the Influenza Vaccination Coverage 

among Healthcare Personnel (NQF #0431) measure for the FY 2016 IRF PPS annual increase 

factor and subsequent years. 

TABLE 9: Summary of FY 2016 IRF PPS Annual Increase Factor

Continued Data Collection: 

• NQF #0138: National Health Safety Network (NHSN) Catheter-associated Urinary Tract 

Infection (CAUTI) Outcome Measure+

• Application of NQF #0678: Percent of Residents with Pressure Ulcers That are New or 

Worsened (Short-Stay)*

Proposed New IRF QRP Measures Affecting the FY 2016 IRF PPS Annual Increase Factor and 

Subsequent Year Increase Factors: 

• NQF #0431: Influenza Vaccination Coverage among Healthcare Personnel+

+

Using CDC NHSN 

*

Using October 1, 2012 release of IRF-PAI
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3. Quality Measures Proposed for Quality Data Reporting Affecting the FY 2017 IRF PPS 

Annual Increase Factor and Subsequent Years 

We are proposing to adopt two additional quality measures, and replace an existing 

quality measure for the IRF QRP for the FY 2017 payment determination and subsequent 

payment determinations. The new measures being proposed are (1) All-Cause Unplanned 

Readmission Measure for 30 Days Post Discharge from Inpatient Rehabilitation Facilities, and 

(2) Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal 

Influenza Vaccine (Short-Stay) (NQF #0680). In addition, we propose to replace the application 

of Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (short-stay) 

(NQF #0678), with adoption of the NQF endorsed version of this measure. We discuss each in 

turn below. 

i. Proposed IRF QRP Measure #1: All-Cause Unplanned Readmission Measure for 30 

Days Post Discharge from Inpatient Rehabilitation Facilities 

 We propose to adopt the All-Cause Unplanned Readmission Measure for 30 Days Post 

Discharge from Inpatient Rehabilitation Facilities. This measure estimates the risk-standardized 

rate of unplanned, all-cause hospital readmissions for cases discharged from an IRF who were 

readmitted to a short-stay acute care hospital or LTCH, within 30 days of an IRF discharge. This 

is a claims-based measure not requiring reporting of new data by IRFs, and hence, will not be 

used to determine IRF reporting compliance for the IRF QRP. 

Addressing unplanned hospital readmissions is a high priority for HHS and CMS as our 

focus continues on promoting patient safety, eliminating healthcare associated infections, 

improving care transitions, and reducing the cost of healthcare. Readmissions are costly to the 
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Medicare program and have been cited as sensitive to improvements in coordination of care and 

discharge planning for patients.5

 Although the literature on readmissions is mainly concerned 

with discharges from short-term acute hospitals, the same issues of discharge planning, 

communications and coordination arise at discharge from other inpatient facilities. 

IRFs provide intensive rehabilitation services to patients after an injury, illness, or 

surgery. According to MedPAC, the average length of stay for most patients in an IRF is 

13.1 days.6 In 2010, almost 360,000 Medicare fee-for-service (FFS) beneficiaries received care 

in IRFs and cost the Medicare FFS program over $6 billion dollars. The unadjusted readmission 

rate to an IPPS hospital in the 30 days following an IRF discharge was about 15 percent7

. With 

such a large proportion of patients being readmitted to a hospital level of care, we are proposing 

a risk-adjusted measure of readmission rate, the All-Cause Unplanned Readmission Measure for 

30 Days Post Discharge from Inpatient Rehabilitation Facilities. An IRF’s readmission rate is 

affected by complex and critical aspects of care such as communication between providers or 

between providers and patients; prevention of, and response to, complications; patient safety; and 

coordinated transitions to the community or a less intense level of care. While disease-specific 

measures of readmission are useful in identifying deficiencies in care for specific groups of 

patients, they account for only a small minority of total readmissions. By contrast, a facilitywide, all-cause readmission reflects a broader assessment of the quality of care in IRFs, and may 

consequently better promote quality improvement and inform consumers about quality. 

While some readmissions are unavoidable, such as those resulting from the inevitable 

progression of disease or worsening of chronic conditions, readmissions may also result from 

 

5 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations, C1a 

6 MedPAC, Report to Congress, Medicare Payment Policy, March, 2012 /. http://www.medpac.gov/chapters/Mar12_Ch09.pdf 

7 Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, Sorensen AV, Thaker S, West ND. Study to support a CMS Report to 

Congress: Assess feasibility of extending the hospital-acquired conditions—present on admission IPPS payment policy to non-IPPS payment 

environments. Prepared for the Centers for Medicare & Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
 113

poor quality of care or inadequate transitions between care settings. Randomized controlled trials 

in short-stay acute care hospitals have shown that improvement in the following areas can 

directly reduce hospital readmission rates: quality of care during the initial admission; 

improvement in communication with patients, their caregivers and their clinicians; patient 

education; pre-discharge assessment; and coordination of care after discharge. Successful 

randomized trials have reduced 30-day readmission rates by 20–40 percent.8,9,10,11,12,13,14 and a 

2011 meta-analysis of randomized clinical trials found evidence that interventions associated 

with discharge planning helped to reduce readmission rates 15, illustrating how hospitals may 

influence readmission rates through best practices. 

Because many studies have shown readmissions to be related to quality of care, and that 

interventions have been able to reduce 30-day readmission rates, we believe it is appropriate to 

include an all-condition readmission rate as a quality measure in the IRF QRP. Promoting quality 

improvements leading to successful transitions of care for patients moving from the IRF setting 

to the community or another post-acute care setting, and reducing preventable facility-wide 

readmission rates, is consistent with the National Quality Strategy priorities of safer, better 

coordinated care and lower costs. 

CMS’s approach to developing this measure is consistent with NQF-endorsed Hospital-

 

8 Jack BW, Chetty VK, Anthony D, Greenwald JL, Sanchez GM, Johnson AE, et al. A reengineered hospital discharge program to decrease 

rehospitalization: a randomized trial. Ann Intern Med 2009;150(3):178–87. 

9 Coleman EA, Smith JD, Frank JC, Min SJ, Parry C, Kramer AM. Preparing patients and caregivers to participate in care delivered across 

settings: the Care Transitions Intervention. J Am Geriatr Soc 2004;52(11):1817–25 

10 Courtney M, Edwards H, Chang A, Parker A, Finlayson K, Hamilton K. Fewer emergency readmissions and better quality of life for older 

adults at risk of hospital readmission: a randomized controlled trial to determine the effectiveness of a 24-week exercise and telephone follow-up 

program. J Am Geriatr Soc 2009;57(3):395–402. 

11 Garasen H, Windspoll R, Johnsen R. Intermediate care at a community hospital as an alternative to prolonged general hospital care for elderly 

patients: a randomized controlled trial. BMC Public Health 2007;7:68. 

12 Koehler BE, Richter KM, Youngblood L, Cohen BA, Prengler ID, Cheng D, et al. Reduction of 30- day post discharge hospital readmission or 

emergency department (ED) visit rates in high-risk elderly medical patients through delivery of a targeted care bundle. J Hosp Med 

2009;4(4):211– 218. 

13 Naylor M, Brooten D, Jones R, Lavizzo-Mourey R, Mezey M, Pauly M. Comprehensive discharge planning for the hospitalized elderly. A 

randomized clinical trial. Ann Intern Med 1994;120(12):999– 1006. 

14 Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, Pauly MV, et al. Comprehensive discharge planning and home follow-up of 

hospitalized elders: a randomized clinical trial. Jama 1999;281(7):613–20.

15 Naylor MD, Aiken LH, Kurtzman ET, Olds DM, Hirschman KB.The Importance of Transitional Care in Achieving Health Reform. Health 

Affairs 2011; 30(4):746-754. 
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Wide (HWR) Risk-Adjusted All-Cause Unplanned Readmission Measure (NQF #1789) 

(http://www.qualityforum.org/Publications/2012/07/Patient_Outcomes_AllCause_Readmissions_Expedited_Review_2011.aspx) finalized for the Hospital IQR Program in 

the FY 2013 IPPS/LTCH PPS Final Rule (FR 77 53521 through 53528). To the extent 

appropriate, the proposed IRF measure is being harmonized with the HWR measure and other 

measures of readmission rates developed for post-acute care (PAC) settings, including LTCHs. 

The All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from 

Inpatient Rehabilitation Facilities measure assesses returns to short-stay acute care hospitals or 

LTCHs within 30 days of discharge from an IRF to the community or another care setting of 

lesser intensity. Patient readmissions are tracked using Medicare claims data for 30 days after 

discharge, to the date of patient death, if the patient dies within 30 days of discharge. Because 

patients differ in complexity and morbidity, the measure is risk-adjusted for patient case-mix. 

The measure also excludes planned readmissions, because these are not considered to be 

indicative of poor quality of care on the part of the IRF. 

A model developed by a CMS measure development contractor predicts admission rates 

while accounting for patient demographics, primary condition in the prior short stay, 

comorbidities, and a few other patient factors. While estimating the predictive power of the 

patient characteristics, the model also estimates a facility specific effect common to patients 

treated at that facility. Similar to the Hospital IQR Program hospital-wide readmission measure, 

the proposed IRF QRP measure is the ratio of the number of risk-adjusted predicted unplanned 

readmissions for each individual IRF, including the estimated facility effect, to the average 

number of risk-adjusted predicted unplanned readmissions for the same patients treated across 

IRFs. A ratio above one indicates a higher than expected readmission rate, or lower level of 
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quality, while a ratio below one indicates a lower than expected readmission rate, or higher level 

of quality (The methodology report detailing the development of the IPPS hospital-wide measure 

and the NQF report may be downloaded from: 

http://www.qualityforum.org/Publications/2012/07/Patient_Outcomes_AllCause_Readmissions_Expedited_Review_2011.aspx.) 

The patient population includes IRF patients who: 

• Were discharged alive from the IRF 

• Had 12 months of Medicare Part A, fee-for-service coverage prior to the IRF stay 

• Had 30 days of Medicare Part A, fee-for-service coverage post discharge. 

• Had an IPPS hospital stay within the 30 days prior to the IRF stay. 

• Were aged 18 years or above when admitted to the IRF. 

As with the Hospital IQR Program hospital-wide readmission measure, patients whose 

principal diagnosis was cancer and whose treatment was non-surgical are excluded. Studies of 

this population that were reviewed for the Hospital IQR Program readmission measure showed 

them to have a different trajectory of illness and mortality than other patient populations16. The 

measure also excludes patients who died during the IRF stay, IRF patients under the age of 18, or 

IRF patients discharged against medical advice (AMA). 

Readmissions that are not included in the measure are: 

• Transfers from an IRF to another IRF or IPPS hospital 

• Readmissions within the 30 day window that are usually considered planned due 

to the nature of the procedures and principal diagnoses of the readmission. 

• IRF stays that are problematic (e.g., with stays that overlap wholly or in part) 

 

16 National Quality Forum. “Patient Outcomes: All-Cause Readmissions Expedited Review 2011”. July 2012. pp12 
 116

The planned readmission list includes the planned procedures specified in the HospitalWide All-Cause Unplanned Readmission Measure (HWR) (NQF #1789) used in the Hospital 

IQR Program, plus other procedures that were determined in consultation with technical expert 

panels. In addition to the list of planned procedures is a list of diagnoses which, if found as the 

principal diagnosis on the readmission claim, would indicate that the procedure occurred during 

an unplanned readmission. 

A discharged patient is tracked until one of the following occurs: (1) the 30-day period 

ends; (2) the patient dies; or (3) the patient is readmitted to an acute level of care (short or long 

term). If multiple readmissions occur, only the first is considered for this measure. If the 

readmission is unplanned, it is counted as a readmission in the measure rate. If the readmission 

is planned, the readmission is not counted in the measure rate. The occurrence of a planned 

readmission ends the 30-day window of the index discharge from the IRF. 

Readmission rates are risk-adjusted for patient case-mix characteristics, independent of 

quality. The risk-adjustment model accounts for demographic characteristics, principal diagnosis, 

co-morbidities, length of stay in the prior IPPS hospital, critical care days in the prior IPPS 

hospital, number of IPPS hospital stays in the prior year, and the occurrence of various surgery 

types in the prior IPPS hospital stay. In modeling IRF readmissions, all patients are included in a 

single model modeling separate patient types separately as was done in the IPPS measure, an 

approach different from the five-cohort approach of the HWR measure, adapted to account for a 

substantially smaller patient population. 

While the HWR measure used one year of data, the smaller IRF patient population leads 

us to propose merging two years of data for the IRF QRP. This approach is similar to that used 

by the Hospital IQR Program condition-specific readmission measures, which use three years of 
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claims data. Merging multiple years produces more precise estimates of the effects of all the risk 

adjusters, and increases the sample size associated with each facility. Larger patient samples are 

better to be able to meaningfully to distinguish facility performance. Under the exception 

authority in section 1886(m)(5)(D)(ii) of the Act, we are proposing to use this measure in the 

IRF QRP. This section provides that in the case of a specified area or medical topic determined 

appropriate by the Secretary for which a feasible and practical measure has not been endorsed by 

the entity with a contract under section 1890(a), the Secretary may specify a measure that is not 

so endorsed as long as due consideration is given to measures that have been endorsed or 

adopted by a consensus organization identified by the Secretary. 

We were not able to identify an appropriate readmission measure for IRFs. In 2012, 

NQF endorsed two hospital-wide readmission measures, the National Committee for Quality 

Assurance (NCQA) measure intended for health plans, Plan All-Cause Readmissions (NQF 

#1768), and CMS’ Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) (NQF 

#1789), of which the latter is the basis of the All-Cause Unplanned Readmission Measure for 30 

Days Post Discharge from Inpatient Rehabilitation Facilities measure being proposed here. This 

measure was present on CMS’s List of Measures Under Consideration, and the most recent MAP 

Pre-Rulemaking Report noted that “readmission measures are also examples of measures that 

MAP recommends be standardized across settings, yet customized to address the unique needs of 

the heterogeneous Post-Acute Care/Long-Term Care (PAC/LTC) population. 

(http://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-

_February_2013.aspx pp. 177-180). Although supported the direction of this measure, they 

cautioned that required further development. MAP has also continually noted the need for care 

transition measures in PAC/LTC performance measurement programs. Setting-specific 
 118

admission and readmission measures under consideration would address this need” 17. 

We intend to seek NQF endorsement of the All-Cause Unplanned Readmission Measure 

for 30 Days Post Discharge from Inpatient Rehabilitation Facilities measure. As this is a claimsbased measure not requiring reporting of new data by IRFs, this measure will not be used to 

determine IRF reporting compliance for the IRF QRP. We are proposing to begin reporting 

feedback to IRFs on performance of this measure in CY 2016. The initial provider feedback will 

be based on CY 2013 and CY 2014 Medicare FFS claims data related to IRF readmissions. The 

readmission measure will be part of the IRF public reporting program once public reporting is 

instated. Additional Details pertaining to this measure can be found on the IRF Quality 

Reporting Program website at http://www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/IRF-Quality-Reporting/index.html. We intend to provide details 

pertaining to the public reporting, such as provider preview of performance results, of this 

measure in our upcoming rules. 

We seek public comment on our proposal to adopt the All-Cause Unplanned Readmission 

Measure for 30 Days Post Discharge from Inpatient Rehabilitation Facilities. 

ii. Proposed IRF QRP Quality Measure #2: Percent of Residents or Patients Who Were 

Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) 

We are proposing to add the NQF# 0680 Percent of Residents or Patients who were 

assessed and Appropriately Given the Seasonal Influenza Vaccination (Short-Stay) measure to 

the IRF QRP, and we propose to collect the data for this measure through the addition of data 

items to the Quality Indicator section of the IRF-PAI. This measure was on CMS’s list of 

 

17 National Quality Forum. Measure Applications Partnership Pre-Rulemaking Report: 2013 Recommendations of 

Measures Under Consideration by HHS: February 2013. Available at 

http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=72738
 119

measures under consideration that were reviewed by the MAP and was included in the MAP 

input that was transmitted to CMS, as required by the pre-rulemaking process in section 

1890A(a)(3) of the Act. The MAP panel supported the use of this measure in the IRF setting, 

noting that it promotes alignment across settings and addresses a core measure concept. A MAP 

finding of “supported” indicates the measure is appropriate for immediate inclusion in the 

program measure set. (MAP Pre-Rulemaking Report: 2013 Recommendations on Measures 

Under Consideration by HHS, Pages 20 and 178, February 2013). 

Although influenza is prevalent among all population groups, the rates of death and 

serious complications related to influenza are highest among those ages 65 and older and those 

with medical complications that put them at higher risk. The CDC reports that an average of 

36,000 Americans die annually from influenza and its complications, and most of these deaths 

are among people 65 years of age and over.18 In 2004, approximately 70,000 deaths were caused 

by influenza and pneumonia, and more than 85 percent of these deaths were among the elderly.19 

Given that many individuals receiving health care services in IRFs are elderly and/or have 

several medical conditions, many IRF patients are within the target population for the influenza 

immunization.20,21

 We propose to add the data elements needed for this measure, as an influenza data item 

set, to the Quality Indicator section of the IRF-PAI. This item set is described below entitled, 

“Proposed Changes to the IRF-PAI That Are Related to the IRF Quality Reporting Program.” 

We are proposing that data for this measure will be collected using a revised version of the IRF-

 

18 Centers for Medicare & Medicaid Services (2011, May). Adult Immunization: Overview. Retrieved from 

https://www.cms.gov/Immunizations/.

19 Gorina Y, Kelly T, Lubitz J, et al. (2008,February).Trends in influenza and pneumonia among older persons in the United States. Aging 

Trends no. 8. Retrieved from http://www.cdc.gov/nchs/data/ahcd/agingtrends/08influenza.pdf. 

20 Centers for Disease Control and Prevention. (2008, September). Influenza e-brief: 2008–2009 flu facts for policymakers. Retrieved from 

http://www.cdc.gov/washington/pdf/flu_newsletter.pdf.

21 Zorowitz, RD. Stroke Rehabilitation Quality Indicators: Raising the Bar in the Inpatient Rehabilitation Facility. Topics in Stroke Rehabilitation 

2010; 17 (4):294–304.
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PAI that includes a new data item set designed to assess patients’ influenza vaccination status. 

The revised IRF-PAI would be effective on October 1, 2014. These proposed data set items are 

harmonized with data elements (O0250: Influenza Vaccination Status) from the Minimum Data 

Set (MDS) 3.0 and LTCH CARE Data Set item sets.22,23 The specifications and data elements 

for this proposed measure are available in the MDS 3.0 QM User’s Manual available on our 

website at https://www.cms.gov/NursingHomeQualityInits/Downloads/MDS30QM-Manual.pdf. 

For purposes of this measure, the influenza vaccination season consists of October 1st (or 

when the vaccine becomes available) through March 31st each year. We are proposing that while 

an IRF’s compliance with reporting quality data for this measure will be based on the calendar 

year, the measure calculation and public reporting of this measure (once public reporting is 

instated) will be based on the influenza vaccination season starting on October 1 (or when 

vaccine becomes available) and ending on March 31 of the subsequent year. 

The IRF-PAI Training Manual will indicate how providers should complete these items 

during the time period outside of the vaccination season (October 1 (or when vaccine becomes 

available) through March 31). The measure specifications for this measure, Percent of Residents 

or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (ShortStay) (NQF #0680), can be found on the CMS website: http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/NHQIQualityMeasures.html. Measure specifications are 

located in the download titled: MDS 3.0 QM User’s Manual V6.0. Additional information on 

 

22 Centers for Medicare & Medicaid Services. MDS 3.0 Item Subsets V1.10.4 for the April 1, 2012 Release. Retrieved from 

https://www.cms.gov/NursingHomeQualityInits/30_NHQIMDS30TechnicalInformation.asp. 

23 The LTCH CARE Data Set Version 2.00, the data collection instrument for the submission of the Percent of Residents or Patients with 

Pressure Ulcers That are New or Worsened (Short-Stay) measure and the Percent of Residents or Patients Who Were Assessed and Appropriately 

Given the Seasonal Influenza Vaccine (Short-Stay) measure, is currently under review by the Office of Management and Budget (OMB) in 

accordance with the Paperwork Reduction Act (PRA) http://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02155.pdf. The LTCH CARE 

Data Set Version 1.01 was approved on April 24, 2012 by OMB in accordance with the PRA. The OMB Control Number is 0938-1163. 

Expiration Date April 30, 2013. 
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this measure can also be found at http://www.qualityforum.org/QPS/0680. Additional discussion 

related to the timing and submission of this measure is provided in this proposed rule. 

We invite public comment on our proposal to use the Percent of Residents or Patients 

Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) 

(NQF #0680) measure for the FY 2017 IRF PPS annual increase factor and subsequent years. 

iii. Proposed IRF QRP Quality Measure #3: Percent of Residents or Patients with Pressure 

Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) – Proposal to adopt the NQF 

endorsed version of this measure. 

In the CY 2013 OPPS/ASC final rule (77 FR 68507) we finalized adoption of a non-riskadjusted application of this measure, using the IRF-PAI released on October 1, 2012 for data 

collection. Although the measure was expanded to the IRF setting in 2012, the existing IRF-PAI 

needed to be updated to include the additional data elements required to risk adjust the measure 

prior to adopting the NQF measure. We also stated that we would not begin public reporting of 

this measure until we had adopted the NQF-endorsed version of this measure, and we would use 

the rulemaking process to solicit public comments on changes made to the IRF-PAI to collect 

elements necessary for risk adjustment of NQF #0678 (77 FR 68507). 

If these proposed data elements related to risk adjustment data element are finalized, we 

also propose to remove the use of the currently adopted non-risk adjusted application of the 

measure and adopt the NQF-endorsed version of NQF #0678 for the FY 2017 IRF PPS increase 

factor. NQF #0678 underwent review for expansion to the IRF setting by the NQF Consensus 

Standards Approval Committee (CSAC) on July 11, 2012 and was subsequently ratified by the 
 122

NQF Board of Directors for expansion to IRF settings on August 1, 201224, 25.The title of the 

measure was changed to Percent of Residents or Patients with Pressure Ulcers that are New or 

Worsened (short-stay) to reflect this expansion. Updated specifications, reflecting the expansion, 

are available on the NQF Web site at http://www.qualityforum.org/QPS/0678. We further 

propose to collect data for this measure using a revised version of the IRF-PAI beginning on 

October 1, 2014 for the FY 2017 IRF PPS annual increase factor. Our proposals related to a 

revised IRF-PAI are discussed in this proposed rule. The measure specifications for this NQF 

endorsed measure, Percent of Residents or Patients with Pressure Ulcers That Are New or 

Worsened (short-stay) (NQF #0678) can be found on the CMS website: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/NursingHomeQualityInits/NHQIQualityMeasures.html. Measure specifications are 

located in the download titled: MDS 3.0 QM User Manual V6.0. Additional information about 

the measure can also be found at http://www.qualityforum.org/QPS/0678.

In summary, we propose to adopt the NQF-endorsed version of NQF #0678, with data 

collection beginning October 1, 2014 using the revised version of IRF-PAI, for quality reporting 

affecting the FY 2017 IRF PPS annual increase factor. Further, we propose to remove the 

current non-risk adjusted application of this measure when the revised IRF-PAI is implemented 

on October 1, 2014. Note that until September 30, 2014, IRFs should continue to submit 

pressure ulcer data using the IRF-PAI released on October 1, 2012 for the purposes of data 

submission requirements for the FY 2015 and FY 2016 IRF PPS increase factor. Changes to the 

 

24National Quality Forum, Consensus Standards Approval Committee Wednesday, July 11, 2012. Transcript. 

Available: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=71612. 

25Press Release: NQF Removes Time-Limited Endorsement Status for 13 Measures, Measures Now Have Endorsed 

Status. August 1, 2012. Available: 

http://www.qualityforum.org/News_And_Resources/Press_Releases/2012/NQF_Removes_TimeLimited_Endorsement_for_13_Measures;_Measures_Now_Have_Endorsed_Status.aspx
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IRF-PAI and additional information regarding data submission are discussed in this proposed 

rule. 

We invite public comment regarding our proposed removal of the currently adopted nonrisk adjusted application of the Percent of Residents or Patients with Pressure Ulcers That Are 

New or Worsened (short-stay) (NQF #0678) and the adoption of the NQF endorsed version of 

the Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (NQF 

#0678). 

TABLE 10: Summary of FY 2017 IRF PPS Annual Increase Factor 

Continued Data Collection: 

• NQF #0138: National Health Safety Network (NHSN) Catheter-associated Urinary Tract 

Infection (CAUTI) Outcome Measure+

Continued Data Collection of Proposed New IRF QRP Measures Affecting the FY 2016 IRF 

PPS Annual Increase Factor: 

• NQF #0431: Influenza Vaccination Coverage among Healthcare Personnel +

Proposed New IRF QRP Measures Affecting the FY 2017 IRF PPS Annual Increase Factor: 

• All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Inpatient 

Rehabilitation Facilities ^

• NQF #0680: Percent of Residents or Patients Who Were Assessed and Appropriately 

Given the Seasonal Influenza Vaccine (Short-Stay)*

• NQF #0678: Percent of Residents or Patients with Pressure Ulcers That are New or 

Worsened (Short-Stay)*

+

Using CDC/NHSN 

*

Using the IRF-PAI released October 1, 2014 

^

Medicare Fee-For-Service claims data

D. Proposed Changes to the IRF-PAI That Are Related to the IRF Quality Reporting 

Program

1. General Background 

A version of the IRF-PAI has been in use in the IRF setting since January 1, 2002, when 

IRFs first began receiving payment under the IRF PPS. IRFs must submit a completed IRF-PAI 

for each Medicare Part A, B, and C patient that is admitted and discharged from the IRF. 
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The IRF PPS utilizes information from the IRF-PAI to classify patients into distinct 

groups based on clinical characteristics and expected resource needs. Separate payments are 

calculated for each group, including the application of case and facility level adjustments 

available at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/index.html . 

 We are proposing to release an updated version of the IRF-PAI on October 1, 2014. 

Proposed revisions include data elements that will (1) allow for risk adjustment of the NQF 

#0678 Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (ShortStay), (2) allow for more detailed data collection related to NQF #0678 Percent of Residents or 

Patients with Pressure Ulcers That Are New or Worsened (Short-Stay), and (3) allow for data 

collection for NQF #0680 Percent of Residents or Patients Who Were Assessed and 

Appropriately Given the Seasonal Influenza Vaccine (Short-Stay). We also propose to adopt a 

new numbering schema for the IRF-PAI. 

Note that we are proposing both mandatory and voluntary additions to the IRF-PAI. 

Collection of voluntary data elements by IRFs will have no impact on measure calculations or on 

our determination of whether the IRF has met the reporting requirements under the IRF QRP. In 

contrast, failure to complete any adopted mandatory data elements may result in non-compliance 

with the IRF QRP requirements and subject the facility to a 2 percentage point reduction in its 

annual increase factor. In addition to clearly indicating which items are mandatory and which 

are voluntary in this proposal, we will post on our website at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html a detailed matrix that identifies which data elements will be required, and 

which will be voluntary. 
 125

The October 1, 2012 release of the IRF-PAI, the proposed October 1, 2014 release of the 

IRF-PAI, inclusive of all the changes proposed here, and information about the IRF-PAI 

submission process can be found at https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html. A PRA package for the revised IRF-PAI 

discussed here has been submitted for the Office of Management and Budget’s (OMB) review 

and approval. 

2. Background Related to Collection of Pressure Ulcer Data Elements Using the IRF-PAI 

In the FY 2012 IRF PPS final rule, we finalized a proposal to adopt an application of the 

NQF# 0678 “Percent of Residents with Pressure Ulcers That Are New or Worsened (ShortStay)” measure for use in the IRF QRP, beginning with the IRF PPS annual increase factor for 

FY 2014. We also finalized our proposal to collect the data for this pressure ulcer measure using 

the IRF-PAI. To do this, we deleted the set of voluntary quality questions that had been located 

in the “Quality Indicator” section of the IRF-PAI and replaced them with a new required set of 

pressure ulcer quality measure data items, numbered 48A to 50D. These revisions to the IRFPAI went into effect on October 1, 2012. 

Since the publication of the FY 2012 IRF PPS final rule we have received numerous 

comments about the current version of the IRF-PAI from IRF providers, provider organizations, 

and advocacy groups. In the CY 2013 OPPS/ASC final rule, we discussed a number of specific 

public comments related to pressure ulcer data that we received in response to the CY 2013 

OPPS/ASC IRF proposed rule (77 FR 68506). Commenters expressed specific concerns 

regarding the ability of the data elements in the IRF-PAI to sufficiently risk-adjust the measure. 

We agreed that there were limitations related to the risk adjustment data items that are on the 

IRF-PAI that went into effect on October 1, 2012, impacting the ability to calculate the measure 

using all of the risk adjustment related covariates. As a result, the CY 2013 OPPS/ASC final 
 126

rule adopted an application of #0680 without risk-adjustment for FY 2015 and subsequent years 

(77 FR 68507). 

 In response to the comments and feedback received in previous rules discussed above, we 

propose modifications to the data items in both the admission and discharge IRF-PAI 

assessments. 

3. Proposed Revisions to the IRF-PAI to Add Mandatory Risk Adjustment Data Items for 

NQF #0678 Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened 

(Short-Stay) 

We are proposing to update the current IRF-PAI to include data elements that are 

necessary to risk adjust the Percent of Residents or Patients with Pressure Ulcers That Are New 

or Worsened (Short-Stay) (NQF# 0678). These include the addition of the following indicator 

boxes to the IRF-PAI admission assessment: (1) Peripheral Vascular Disease, (2) Peripheral 

Arterial Disease, and (3) Diabetes. The additions would be placed in the Quality Indicators 

section of the revised IRF-PAI. 

We further determined that risk adjustment factors related to height and weight had 

inadvertently been left off of the revised version of the IRF-PAI that became effective on 

October 1, 2012. We are now proposing to add height and weight to the IRF-PAI to correct this 

oversight. 

We further propose adding the height and weight items into the “Medical Information” 

section if the IRF-PAI. As a general rule, we would place all data items related to quality 

reporting and quality measures within the Quality Indicator section of the IRF-PAI. However, 

the height and weight items have a dual purpose because they can be used for the calculation of 

Body Mass Index (BMI), which is used as one part of the analysis for compliance with the 60 
 127

percent rule. Even though the height and weight items are placed in the “Medical Information” 

section of the IRF-PAI, they are also being added to the IRF-PAI for calculating risk adjustment 

for the pressure ulcer measure. Failure to provide height and weight could result in a finding of 

non-compliance with the reporting requirements. 

We invite public comment on our proposal to include data elements required for riskadjustment of #0678 Percent of Patients with Pressure Ulcers That Are New or Worsened 

Measure as mandatory data collection elements in the revised IRF-PAI. 

4. Proposed Revisions to the IRF-PAI to Add Voluntary Data Items related to NQF #0678 

Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 

The pressure ulcer measure numerator for the NQF# 0678 endorsed version of the 

“Percent of Patients with Pressure Ulcers That Are New or Worsened” measure looks at the 

number of patients with a target assessment during the selected time window who have one or 

more Stage 2 through 4 pressure ulcer(s) that are new or that have worsened compared with the 

previous assessment. According to the NQF website, in its description of NQF #0678, “Stage 1 

pressure ulcers are excluded from this measure because recent studies have identified difficulties 

in objectively measuring them across different populations.” The measure numerator also does 

not include unstageable pressure ulcers. The data that is mandatory for IRFs to report under the 

IRF QRP are those that meet the requirements of the application of NQF #0678 that we finalized 

in the CY 2013 OPPS/ASC Final Rule. As noted above, we are proposing to add additional 

mandatory data items to accommodate this. If our proposal to adopt the NQF-endorsed version 

of this measure is finalized, the mandatory data would remain the same. 

We are also proposing to add voluntary data items to the IRF-PAI Quality Indicators 

section, designed to address commenters’ concerns about the adequacy of current pressure ulcer 
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data items. Some commenters expressed concern that the current data items would not allow for 

documentation of all relevant categories of pressure ulcers, such as unstageable pressure ulcers. 

As modified, our proposed admission assessment consists of 2 main topics: (1) Unhealed 

Pressure Ulcers; and (2) Pressure Ulcer Risk Conditions. Also, the discharge assessment 

consists of 2 main topics: (1) Unhealed Pressure Ulcers; and (2) Healed Pressure Ulcers. Within 

each main topic there are sub-topics that contain a set of questions. The provider is asked to 

document how many pressure ulcers, if any, the patient has at each stage upon admission. We 

have added new questions that extend beyond stages 2 through 4 pressure ulcers, covering the 

presence of stage 1 pressure ulcers, as well as unstageable pressure ulcers that are due to a nonremovable device or dressing, to slough or eschar, or deep tissue injury. We note that the 

discharge assessment differs somewhat from the admission assessment with regard to the 

pressure ulcer questions. A copy of the proposed new IRF-PAI can be found at 

https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html. 

We have added greater specificity to the pressure ulcer items to allow providers to 

document pressure ulcers in more detail. In describing the inadequacy they perceived in the 

present pressure ulcer items, providers described such situations as those in which a patient is 

admitted into an IRF with an unstageable pressure ulcer that is a suspected deep tissue injury 

(DTI). During the course of the IRF stay the DTI evolves into a stage 3 and, after several days, 

worsens to a stage 4. On the current version of the IRF-PAI, providers have no ability to 

document the presence of an unstageable pressure ulcer that existed when the patient was 

admitted. Whether or not the IRF believes there is an unstageable pressure ulcer, the IRF must 

document that the patient had no pressure ulcers on the admission assessment. However later, 
 129

after the DTI worsens to a stage 3, if the IRF judges from the nature of the pressure ulcer that it 

was extremely likely to have been present at admission, the IRF would have to go back and 

change their documentation on the admission assessment to reflect that the patient actually had a 

stage 3 pressure ulcer upon admission. Upon discharge, the IRF would document that the patient 

has a stage 4 pressure ulcer. With the new proposed pressure ulcer data items, the IRF would be 

able to document the presence of the unstageable pressure ulcer or suspected DTI on the 

admission assessment. The proposed revisions to the IRF-API would allow the IRF to give a 

more complete and accurate picture of the progression of this pressure ulcer when the patient is 

discharged. 

 While Stage 1 and unstageable pressure ulcers are not part of the NQF #0678 endorsed 

version of the “Percent of Patients with Pressure Ulcers That Are New or Worsened,” and are not 

mandatory, we nonetheless believe that it is appropriate and important for us to collect this 

information. As the measure steward for this measure, CMS would like to gather and analyze 

data regarding Stage 1 and unstageable pressure ulcers to help determine if any modification to 

the existing measure should be made. This data could also help us determine if any additional 

pressure ulcer measures should be developed. For example, collecting data about Stage 1 

pressure ulcers could provide us with information that would allow us to assess whether these 

pressure ulcers can now be objectively measured across different populations. 

Additionally, some pressure ulcers that are present on admission can become stageable 

and then worsen to a higher stage during the IRF stay. Access to data on this scenario would 

assist us in determining whether including unstageable and Stage 1 measures in the measure 

results may be appropriate in the future. We might accomplish this by expanding the current 

measure or developing an entirely new pressure ulcer measure. 
 130

 We invite public comment on our proposed revisions to the IRF-PAI related to voluntary 

items for NQF #0678 Percent of Residents or Patients with Pressure Ulcers That Are New or 

Worsened (Short-Stay). 

5. Proposed Revisions to the IRF-PAI to Add Mandatory Data Items related to NQF #0680 

Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal 

Influenza Vaccine (Short-Stay) 

We are also proposing changes to the IRF-PAI discharge assessment to include the 

addition of the data elements necessary to report the data necessary for the proposed measure, 

Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal 

Influenza Vaccine (Short-Stay) (NQF #0680). These items will be based on the items from the 

MDS 3.0 and LTCH CARE Data Set items.26 , 27 There are three data elements collected in 

relation to this measure: two are used to calculate the measure and a third is used to ensure 

internal consistency and data accuracy. The items are as follows: Did the patient receive the 

influenza vaccine in this facility for this year’s influenza vaccination season? Date influenza 

vaccine was received; and, If influenza vaccine not received, state reason. These questions allow 

the IRF to report if and when an influenza vaccine was given at the facility. It also allows the 

IRF to indicate why a vaccine was not given if that is the case. Further details on the 

specifications and data elements for this measure are available in the MDS 3.0 QM User’s 

Manual available on our website at http://www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/NursingHomeQualityInits/NHQIQualityMeasures.html. Measure 

 

26 Centers for Medicare & Medicaid Services. MDS 3.0 Item Subsets V1.10.4 for the April 1, 2012 Release. Retrieved from 

https://www.cms.gov/NursingHomeQualityInits/30_NHQIMDS30TechnicalInformation.asp. 

27 The LTCH CARE Data Set Version 2.00, the data collection instrument for the submission of the Percent of Residents or Patients with 

Pressure Ulcers That are New or Worsened (Short-Stay) measure and the Percent of Residents or Patients Who Were Assessed and Appropriately 

Given the Seasonal Influenza Vaccine (Short-Stay) measure, is currently under review by the Office of Management and Budget (OMB) in 

accordance with the Paperwork Reduction Act (PRA) http://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02155.pdf. The LTCH CARE 

Data Set Version 1.01 was approved on April 24, 2012 by OMB in accordance with the PRA. The OMB Control Number is 0938-1163. 

Expiration Date April 30, 2013. 
 131

specifications are located in the download titled: MDS 3.0 QM User’s Manual V6.0. Measure 

information is also available at http://www.qualityforum.org/QPS/0680.

 We invite public comment on our proposed revisions to the IRF-PAI related to NQF 

#0680 Percent of Residents or Patients Who Were Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short-Stay). 

6. Proposed Revisions to the IRF-PAI Related to Numbering of Quality Indicator Items. 

Finally, in the revised IRF-PAI, we include changes in the numbering scheme used in the 

Quality Indicator section of the IRF-PAI from a “consecutive numbering scheme” for numbering 

assessment items to a numbering scheme that allows greater flexibility for item removal and 

insertion. Problems arise with a consecutive numbering scheme when items are removed or new 

ones are inserted because this changes the numbers of some or all of the items around them. 

Other CMS post- acute care data collection vehicles, such as the MDS 3.0, and the LTCH CARE 

Data Set, have adopted a more flexible numbering schema that allows insertion or removal of 

items without requiring renumbering of the remaining items. We propose adopting a similar 

numbering schema in the revised IRF-PAI. A less flexible numbering system that necessitates 

renumbering items on the IRF-PAI in the event of such changes will result in a given item 

number having very different meanings on different versions of the IRF-PAI item set. 

For more details about our plans for changes to the IRF-PAI, see 

https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/IRFPAI.html. 

We invite public comments about our proposed changes to the numbering schema of the 

IRF-PAI. 

E. Proposed Change in Data Collection and Submission Periods for Future Program Years
 132

The FY 2012 IRF PPS final rule included an initial framework for the IRF QRP. In that 

rule we also finalized the initial quality measures to be used in the IRF QRP, stated how data for 

these measures would to be collected, and selected the time periods for the data collection and 

reporting of the quality data. 

The FY 2012 IRF PPS final rule finalized the initial IRF QRP data reporting cycle, 

affecting the FY 2014 payment determination, as beginning on October 1, 2012 and ending on 

December 31, 2012. Beginning in 2013 for the FY 2015 payment determination, and for 

subsequent years, we finalized that quality reporting cycles be based on a full calendar year (CY) 

cycle (76 FR 47879). 

 When there are new measures added to the quality reporting program that will be 

collected on the IRF-PAI, that data collection instrument must be updated accordingly. The next 

update to the IRF- PAI will take place on October 1, 2014. Under current policy, the IRF QRP 

data collection cycle for the FY 2016 payment determination will not begin until 

January 1, 2014. 

To accommodate the revised data collection instrument, we are proposing to change the 

IRF-PAI data collection periods for the FY 2016 and FY 2017 payment determinations in order 

to align with the release of the new version of the IRF-PAI on October 1, 2014. We propose to 

shorten the data collection period impacting the FY 2016 IRF PPS annual increase factor to nine 

months, so that the next reporting period may begin on October 1, 2014 using the new version of 

the IRF-PAI. Under this proposal, the next data collection period would run from 

January 1, 2014 to September 30, 2014 and affect the IRF PPS annual increase factor for 

FY 2016. 
 133

Starting October 1, 2014, we propose to start fiscal year data collection periods, such that 

data collected for discharges during October 1, 2014 to September 30, 2015 will affect the 

FY 2017 IRF PPS annual increase factor. We further propose that data collection continue on 

FY cycles unless there is an event that requires that this cycle be amended. We intend to provide 

public announcements in the event the established cycles must be changed. 

Note that, as a result of this proposal, data submitted on the IRF-PAI and data submitted 

using the NHSN will have two separate data collection and submission schedules. We provide 

more details on this distinction below. We invite public comment on our proposal to alter the 

IRF-PAI data collection periods impacting the FY 2016 and FY 2017 increase factors in a way 

that aligns with the release of the next version of the IRF-PAI instrument. 

1. Proposed Implementation of Quarterly Data Submission Deadlines for the IRF QRP 

 In the FY 2012 IRF PPS rule we stated that “details regarding data submission and 

reporting requirements for this measure will be posted on the CMS website at 

https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html no later than January 31, 2012” (FR 76 47879). Further data submission 

details for the IRF QRP were posted on the CMS IRF QRP website on January 31, 2012, as 

promised. In addition, data submission details were disseminated to IRFs at various times from 

January 31, 2012 to December 31, 2012, through an in-person training held on May 2, 2012, 

Open Door Forums, list-serve announcements, IRF QRP webpage postings and responses to IRF 

QRP Helpdesk inquiries. In these communications, we announced that the final data submission 

deadline for the IRF QRP would be May 15th for all measures finalized for the FY 2014 payment 

determination and each subsequent payment determination. 
 134

 We realize the value in providing clear submission deadlines for the IRF QRP and we 

believe that we should provide deadlines that clearly distinguish between data submitted using 

the NHSN and data submitted using the IRF-PAI. Further, it is important to have distinct 

deadlines at which point data submitted afterward, including data modifications and corrections, 

could not be used for reporting or IRF PPS annual increase factor determinations For purposes 

of the FY 2016 and subsequent year IRF PPS annual increase factors, and for the purposes of 

applying quarterly deadlines for public reporting purposes, we propose the inclusion of quarterly 

data submission deadlines in addition to the previously finalized deadlines. We believe that this 

will ensure timely submission of data. 

2. Quarterly Submission Timelines of Data Reported Using the IRF-PAI 

For the purposes of quality data reported using the IRF-PAI for the IRF QRP, we have 

proposed timeframes described below that we believe will provide sufficient time for IRFs and 

CMS to meet quality reporting requirements and allow CMS to harmonize IRF QRP data 

submission deadlines with the LTCHQR Program and Hospital IQR. Beginning with data 

collection and reporting impacting the FY 2016 annual increase factor, we propose that IRFs 

follow the deadlines presented in the tables below to complete submission of data for each 

quarter. For each quarter outlined in the tables below during which IRFs are required to collect 

data, we propose a final deadline occurring approximately 135 days after the end of each quarter 

by which all data collected during that quarter must be submitted. We believe that this is a 

reasonable amount of time to allow IRFs to submit data and make any necessary corrections. 

We have summarized these deadlines in the tables below. 

TABLE 11: Proposed Timelines for Submission of IRF QRP Program Quality Data using 

IRF-PAI* for FY 2016 IRF PPS Annual Increase Factor+

: 

Application of NQF #0678 Percent of Residents or Patients with Pressure Ulcers 

That are New or Worsened (Short-Stay)
 135

Quarter IRF-PAI Data Collection Period IRF-PAI Data Submission 

Deadline for Corrections of 

the IRF QRP

FY 2016 Annual Increase Factor

Quarter 1 January 1, 2014 – March 31, 2014 August 15, 2014 

Quarter 2 April 1, 2014 – June 30, 2014 November 15, 2014 

Quarter 3 July 1, 2014 – September 30, 2014 February 15, 2015 

* Using October 1, 2012 release of IRF-PAI. 

+

 FY 2016 APU determination is based on 3 quarters of data submission for the pressure ulcer measure. 

TABLE 12: Proposed Timelines for Submission of IRF QRP Program Quality Data using 

IRF-PAI* for FY 2017 IRF PPS Annual Increase Factor: 

NQF #0678 Percent of Residents or Patients with Pressure Ulcers That are New or 

Worsened (Short-Stay), and NQF #0680 Percent of Residents or Patients Who Were 

Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay)

Quarter IRF-PAI Data Collection Period IRF-PAI Data Submission 

Deadline for Corrections of 

the IRF QRP 

FY 2017 Annual Increase Factor

Quarter 1 October 1, 2014 – December 31, 

2014 

May 15, 2015 

Quarter 2 January 1, 2015 – March 31, 2015 August 15, 2015 

Quarter 3 April 1, 2015 – June 30, 2015 November 15, 2015 

Quarter 4 July 1, 2015 – September 30, 2015 February 15, 2016 

* Using October 1, 2014 release of IRF-PAI. 

3. Quarterly Submission Timelines of Data Reported Using NHSN 

For the purposes of reporting quality data using the NHSN, specifically CAUTI 

reporting and reporting of the staff influenza immunization measure, we are specifically 

proposing to align with CMS’s established submission deadlines in the Hospital IQR and the 

LTCHQR Programs. The CDC recommends that a facility report Healthcare Acquired Infection 

(HAI) events such as CAUTI, as close to the time of the event as is possible, and certainly within 
 136

30 days. CMS recommends adherence to this approach. In addition, we propose that IRFs 

report CAUTI events, including null events, on a monthly level using the NHSN. 

For the purposes of continuity, we propose to continue the calendar year basis of 

reporting CAUTI, using quarterly deadlines as established by the Hospital IQR program. Final 

submission deadlines for measures collected through the NHSN are shown in the tables below. 

TABLE 13: Proposed Timelines For Submission of IRF QRP Program Quality Data using 

CDC/NSHN For FY 2016 and FY 2017 IRF PPS Annual Increase Factor: 

National Health Safety Network (NHSN) Catheter-associated Urinary Tract 

Infection (CAUTI) Outcome Measure

Quarter CDC/NHSN Data Collection Period CDC/NHSN 

Data 

Submission 

Deadline 

FY 2016 Annual Increase Factor 

Quarter 1 January 1, 2014 – March 31, 2014 August 15, 2014 

Quarter 2 April 1, 2014 – June 30, 2014 November 15, 2014 

Quarter 3 July 1, 2014 – September 30, 2014 February 15, 2015 

Quarter 4 October 1, 2014 – December 31, 2014 May 15, 2015 

FY 2017 Annual Increase Factor 

Quarter 1 January 1, 2015 – March 31, 2015 August 15, 2015 

Quarter 2 April 1, 2015 – June 30, 2015 November 15, 2015 

Quarter 3 July 1, 2015 – September 30, 2015 February 15, 2016 

Quarter 4 October 1, 2015 – December 31, 2015 May 15, 2016 

Further, we propose to apply to IRF QRP the same deadlines established for the reporting 

of the Influenza Vaccination Coverage Among Health Personnel (NQF #0431) measure in the 

Hospital IQR Program and proposed in the LTCH QRP. 

TABLE 14: Proposed Timelines For Submission of IRF QRP Program Quality Data using 

CDC/NSHN for FY 2016 and FY 2017 IRF PPS Annual Increase Factor: 

NQF #0431 Influenza Vaccination Coverage Among Healthcare Personnel

Data collection timeframe CDC/NHSN Data Submission Deadline 

FY 2016 Annual Increase Factor 

October 1, 2014 (or when the 

influenza vaccine becomes available) 

– March 31, 2015 

May 15, 2015 
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Data collection timeframe CDC/NHSN Data Submission Deadline 

FY 2017 Annual Increase Factor

October 1, 2015 (or when the 

influenza vaccine becomes available) 

– March 31, 2016 

May 15, 2016 

We invite public comment on the proposed data submission quarterly and final deadlines 

for the purposes of reporting data using the IRFPAI and for the purposes of reporting data using 

the NHSN. 

F. Proposed Reconsideration and Appeals Process 

At the conclusion of any given data reporting period, we will review the data received 

from each IRF during that reporting period to determine if the IRF has reported the required 

amount and type of data. IRFs that are found to be non-compliant with the reporting 

requirements set forth for that reporting cycle could receive a reduction in the amount of 

2 percentage points to their IRF PPS increase factor for the upcoming payment year. 

We are aware that there may be situations in which an IRF provider has evidence to 

dispute a finding of non-compliance. We further understand that there may be times when a 

provider may be prevented from submitting quality data due to the occurrence of extraordinary 

circumstances beyond their control (for example, natural disasters). It is our goal not to penalize 

IRF providers in these circumstances or to unduly increase their burden during these times. 

We are also aware, for the purposes of the IRF Quality Reporting Program, that we will 

be making compliance determinations for the FY 2014 payment determination in the coming 

months and believe that providers should have the opportunity to request a reconsideration if the 

circumstances warrant. In addition, adding a reconsideration process to the IRF Quality 

Reporting program will make it consistent with other established quality reporting programs, a 

number of which already offer this opportunity. We are therefore providing a mechanism that 
 138

will allow IRFs to request reconsiderations pertaining to their FY 2014 payment determinations 

and that of subsequent fiscal years. 

Specifically, as part of the mechanism to allow for IRFs to request a reconsideration, 

IRFs found to be non-compliant with the reporting requirements during a given reporting cycle 

will be notified of that finding. IRFs will be informed: (1) that they have been identified as 

being non-compliant with the IRF Quality Reporting Program’s reporting requirements for the 

reporting cycle in question; (2) that they will be scheduled to receive a reduction in the amount 

of 2 percentage points to their PPS increase factor for the upcoming payment year; (3) that they 

may file a request for reconsideration if they believe that the finding of non-compliance is 

erroneous, or that if they were non-compliant, they have a valid and justifiable excuse for this 

non-compliance; and (4) that they must follow a defined process on how to file a request for 

reconsideration, which will be described in the notification. 

Upon the conclusion of our review of each request for reconsideration, we will render a 

decision. We may reverse our initial finding of non-compliance if: (1) the IRF provides proof of 

full compliance with all requirements during the reporting period; or (2) the IRF provides 

adequate proof of a valid or justifiable excuse for non-compliance if the IRF was not able to 

comply with requirements during the reporting period. We will uphold our initial finding of noncompliance if the IRF cannot show any justification for non-compliance. 

We intend to provide details pertaining to the reconsideration process, and the 

mechanisms related to provider requests for reconsideration of their payment determinations, 

such as filing requests, required content, supporting documentation, and mechanisms of 

notification and final determinations on the IRF QRP website this spring at 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-
 139

Reporting/index.html. We invite public comment on the proposed procedures for 

reconsideration and appeals. 

G. Proposed Policy for Granting of a Waiver of the IRF QRP Data Submission 

Requirements in Case of Disaster or Extraordinary Circumstances

Our experience with other quality reporting programs has shown that there are times 

when providers are unable to submit quality data due to the occurrence of extraordinary 

circumstances beyond their control (for example, natural or man-made disasters). We define a 

“disaster” as any natural or man-made catastrophe which causes damages of sufficient severity 

and magnitude to partially or completely destroy or delay access to medical records and 

associated documentation. Natural disasters could include events such as hurricanes, tornadoes, 

earthquakes, volcanic eruptions, fires, mudslides, snowstorms, and tsunamis. Man-made 

disasters could include such events as terrorist attacks, bombings, floods caused by man-made 

actions, civil disorders, and explosions. A disaster may be widespread or impact multiple 

structures or be isolated and impact a single site only. 

In certain instances of either natural or man-made disasters, an IRF may have the ability 

to conduct a full patient assessment, and record and save the associated data either during or 

before the occurrence of an extraordinary event. In this case, the extraordinary event has not 

caused the facility’s data files to be destroyed, but it could hinder the IRF’s ability to meet the 

quality reporting program’s data submission deadlines. In this scenario, the IRF would 

potentially have the ability to report the data at a later date, after the emergency circumstances 

have subsided. In such cases, a temporary waiver of the IRF duty to report quality measure data 

may be appropriate. 

In other circumstances of natural or man-made disaster, an IRF may not have had the 
 140

ability to conduct a full patient assessment, and record and save the associated data before the 

occurrence of an extraordinary event. In such a scenario, the facility does not have data to 

submit to CMS as a result of the extraordinary event. We believe that it is appropriate, in these 

situations, to grant a full waiver of the reporting requirements. 

It is our goal not to penalize IRF providers in these circumstances or to unduly increase their 

burden during these times. Therefore, we are proposing a process, for payment year 2015 and 

subsequent years, for IRF providers to request and for CMS to grant waivers with respect to the 

reporting of quality data when there are extraordinary circumstances beyond the control of the 

provider. When a waiver is granted, an IRF will not incur payment reduction penalties for 

failure to comply with the requirements of the IRF QRP. 

We are proposing a process that, in the event that an IRF seeks to request a waiver for quality 

reporting purposes for payment year 2015 and subsequent payment years, the IRF may request a 

waiver for one or more quarters by submitting a written request to CMS. We are proposing that 

IRFs compose a letter to CMS that documents the waiver request, with the information described 

below, and submit the letter to CMS via email to the IRF Help Desk at 

IRFQualityQuestions@cms.hhs.gov. IRFs that have filed a request for an IRF QRP disaster 

waiver with an IRF-PAI waiver request using the procedure that is described under our 

regulations at 42 CFR §412.614 can indicate this in their letter to CMS for their request for a 

waiver for quality reporting purposes. 28 

Note that the subject of the email must read “Disaster Waiver Request” and the letter must 

contain the following information: 

• IRF CCN; 

 

28 http://www.gpo.gov/fdsys/pkg/CFR-2011-title42-vol2/pdf/CFR-2011-title42-vol2-sec412-614.pdf 
 141

• IRF name; 

• CEO or CEO-designated personnel contact information including name, 

telephone number, email address, and mailing address (the address must be a physical address, 

not a post office box); 

• IRF’s reason for requesting a waiver; 

• Evidence of the impact of extraordinary circumstances, including but not limited 

to photographs, newspaper and other media articles; and 

• A date when the IRF believes that it will again be able to submit IRF QRP data 

and a justification for the proposed date. 

We propose that the letter documenting the disaster waiver request be signed by the IRF’s 

CEO, and must be submitted within 30 days of the date that the extraordinary circumstances 

occurred. Following receipt of the letter, we would: (1) provide a written acknowledgement, 

using the contact information provided in the letter, to the CEO or designated contact person, 

notifying them that the request has been received, and (2) after CMS has made a decision as to 

whether to grant to waiver request, provide a formal response to the CEO, or designated contact 

person notifying them of our decision. 

This proposal does not preclude CMS from granting waivers to IRFs that have not 

requested them when we determine that an extraordinary circumstance, such as an act of nature, 

affects an entire region or locale. If we make the determination to grant a waiver to IRFs in a 

region or locale, we propose to communicate this decision through routine communication 

channels to IRFs and vendors, including but not limited to issuing memos, emails, and notices on 

https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html.
 142

We invite public comment on this proposal. 

H. Public Display of Data Quality Measures for the IRF QRP Program

Under section 1886(j)(7)(E)of the Act, the Secretary is required to establish procedures 

for making data submitted under the IRF QRP available to the public. Section 1886(j)(7)(E) also 

requires procedures to ensure that each IRF provider has the opportunity to review that data that 

is to be made public with respect to its facility, prior to such data being made public. Section 

1886(j)(7)(E) of the Act requires CMS to report quality measures that relate to services furnished 

in IRFs on CMS’ website. 

Currently, the Agency is developing plans regarding the implementation of these 

provisions. We appreciate the need for transparency into the processes and procedures that will 

be implemented to allow for the public reporting of the IRF QRP data and to afford providers the 

opportunity to preview that data before it is made public. At this time, we have not established 

procedures or timelines for public reporting of data, but we intend to include related proposals in 

future rule making. We welcome public comments on what we should consider when 

developing future proposals related to public reporting. 

I. Method for Applying the Reduction to the FY 2014 IRF Increase Factor for IRFs that 

Fail to Meet the Quality Reporting Requirements

As previously noted, section 1886(j)(7)(A)(i) of the Act requires application of a 

2 percentage point reduction of the applicable market basket increase factor for IRFs that fail to 

comply with the quality data submission requirements. FY 2014 is to be the first year that the 

mandated reduction will be applied for IRFs that failed to comply with the data submission 

requirements during the data collection period October 1, 2012 through December 31, 2012. 

Thus, in compliance with 1886(j)(7)(A)(i) of the Act, we will apply a 2 percentage point 
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reduction to the applicable FY 2014 market basket increase factor (1.7 percent) in calculating an 

adjusted FY 2014 standard payment conversion factor to apply to payments for only those IRFs 

that failed to comply with the data submission requirements. As noted previously, application of 

the 2 percentage point reduction may result in an update that is less than 0.0 for a fiscal year and 

in payment rates for a fiscal year being less than such payment rates for the preceding fiscal year. 

Also, reporting-based reductions to the market basket increase factor will not be cumulative; they 

will only apply for the FY involved. Table 15 shows the calculation of the adjusted FY 2014 

standard payment conversion factor that will be used to compute IRF PPS payment rates for any 

IRF that failed to meet the quality reporting requirements for the period from October 1, 2012 

through December 31, 2012. 

TABLE 15: Calculations to Determine the Proposed Adjusted FY 2014 Standard Payment 

Conversion Factor for IRFs that Failed to Meet the Quality Reporting Requirement 

Explanation for Adjustment Calculations 

Standard Payment Conversion Factor for FY 2013 $14,343 

Adjusted Market Basket Increase Factor for FY 2014 (2.5 percent), 

reduced by 0.3 percentage point in accordance with sections 

1886(j)(3)(C) and (D) of the Act and a 0.4 percentage point reduction for 

the productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of 

the Act, further reduced by 2 percentage points for IRFs that failed to 

meet the quality reporting requirement x 0.99800 

Budget Neutrality Factor for the Wage Index and Labor-Related Share x 1.0011 

Budget Neutrality Factor for the Revisions to the CMG Relative Weights

x 

1.0000 

Budget Neutrality Factor for the Update to the Rural Adjustment Factor x 1.0030 

Budget Neutrality Factor for the Update to the LIP Adjustment Factor x 1.0174 

Budget Neutrality Factor for the Update to the Teaching Status 

Adjustment Factor x 0.9966 

Proposed Adjusted FY 2014 Standard Payment Conversion Factor = $14,573 

XIV. Collection of Information Requirements 
 144

Under the Paperwork Reduction Act of 1995 we are required to provide 60-day 

notice in the Federal Register and solicit public comment before a collection of information 

requirement is submitted to the Office of Management and Budget (OMB) for review and 

approval. To fairly evaluate whether an information collection should be approved by OMB, 

section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment 

on the following issues: 

● The need for the information collection and its usefulness in carrying out the proper 

functions of our agency. 

● The accuracy of our estimate of the information collection burden. 

● The quality, utility, and clarity of the information to be collected. 

 ● Recommendations to minimize the information collection burden on the affected 

public, including automated collection techniques. 

This proposed rule does not impose any new information collection requirements as 

outlined in the regulation text. However, this proposed rule does make reference to associated 

information collections that are not discussed in the regulation text contained in this document. 

The following is a discussion of these information collections, some of which have already 

received OMB approval. 

We are soliciting public comment on each of these issues for the following sections of 

this document that contain information collection requirements (ICRs). 

A. ICRs Regarding IRF QRP

As stated in section XIII. of the preamble of this proposed rule, we have proposed to 

introduce one new measure for use in the IRF QRP that will require IRF providers to submit new 

data beginning on October 1, 2014 and which will affect the increase factor for FY 2016. This 
 145

quality measure is: Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431). 

We have also proposed to introduce for FY 2017 an All-Cause Unplanned Readmission Measure 

for 30 Days Post Discharge from Inpatient Rehabilitation Facilities. This measure is a claimsbased measure that does not require submission of data by IRF providers. For FY 2017, we have 

proposed to adopt the Percent of Resident or Patients Who Were Assessed and Appropriately 

Given the Seasonal Influenza Vaccine (Short-Stay) (NQF#0680) measure. We have also 

proposed for FY 2017 to change from the use of a non-risk adjusted pressure ulcer measure, in 

which only numerator and denominator data is collected, to use of the NQF endorsed measure 

“Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay)” 

(NQF #0678), which is a risk-adjusted measure. Each of these measures will be collected in the 

manner described below: 

1. Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) 

In section XIII. of this proposed rule, we are proposing to add the new measure, Influenza 

Vaccination Coverage among Healthcare Personnel (NQF #0431) to the IRF QRP. IRFs will be 

required to collect data related to the number of healthcare personnel working at a facility who 

have been vaccinated against the influenza virus during a given influenza vaccination season. 

The CDC has determined that the influenza vaccination season begins on October 1st (or when 

the vaccine becomes available) and ends on the following March 31st each year. This measure 

requires that the provider submit only one report to NHSN after the close of the data collection 

period each year. 

We believe that it has become a common practice for healthcare facilities, including 

IRFs, to promote vaccination of employees for the influenza virus and to keep records of which 

of their staff members received this vaccination each year. Therefore, we do not believe that 
 146

IRFs will incur any additional burden related to the collection of the data for this measure. 

We anticipate that it will take approximately 15 minutes to prepare and transmit the 

required data for this measure to the CDC each year. The reporting of the data for this measure 

can be done while the provider is logged onto NHSN for the purpose of entering their CAUTI 

measure data. We believe that this task can be completed by an administrative person such as a 

Medical Secretary Medical Data Entry Clerk. The average hourly wage for Medical Records or 

Health Information Technicians is $15.55.29 We estimate that the annual cost to each IRF for the 

reporting of the staff influenza measure will be $3.98 .30 The annual cost across the 1161 IRFs in 

the U.S. that are reporting data to CMS is estimated to be $4,62131.

2. All-Cause Unplanned Readmission Measure for 30 Days Post Discharge from Inpatient 

Rehabilitation Facilities

As stated in section XIII. of this proposed rule, data for this measure will be collected 

from Medicare claims and therefore will not add any additional reporting burden for IRFs. 

1. Percent of Residents or Patients with Pressure Ulcers that are New or Have Worsened 

(Short-Stay) (NQF #0678) 

In section XIII of this proposed rule, we proposed to adopt the NQF endorsed version of 

the measure titled “Percent of Residents or Patients with Pressure Ulcers That Are New or 

Worsened (Short-Stay)” (NQF #0678). To support the standardized collection and calculation of 

this quality measure, we have proposed to modify the current Inpatient Rehabilitation Facility-

 

29 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Medical Records & Health 

Information Technician is $15.55. See: http://www.bls.gov/ooh/healthcare/medical-records-and-health-informationtechnicians.htm .

30 15 minutes administrative staff time to collect and report staff influenza measure @ $15.55 per hour = $3.98 per 

IRF per year 

31 At the time of the writing of this rule, there were 1161 IRFs reporting quality data to CMS. ($3.98 per IRF per year x 1161 

IRFs in U.S.= $4,621). 
 147

Patient Assessment Instrument (IRF-PAI) by replacing the current pressure ulcer items with data 

elements similar or identical to those collected through the Minimum Data Set 3.0 (MDS 3.0) 

used in nursing homes. By building upon preexisting resources for data collection and 

submission, we intend to reduce administrative burden related to data collection and submission. 

We anticipate that the initial setup and acclimation to pressure ulcer data collection will have 

already occurred with the adoption of the Pressure Ulcer measure for the IRF QRP for the 

FY 2014 payment determination. Therefore, we believe the transition to reporting additional 

data elements for this measure will be less burdensome. 

We expect that the admission and discharge pressure ulcer data will be collected by a 

clinician such as an RN because the assessment and staging of pressure ulcers requires a high 

degree of clinical judgment and experience. We estimate that it will take approximately 10 

minutes of time by the RN to perform the admission pressure ulcer assessment. We further 

estimate that it will take an additional 15 minutes of time to complete the discharge pressure 

ulcer assessment. We expect that during these time periods, the RN would be engaged in the 

collection of data for the purpose of the IRF QRP and would not be engaged in the performance 

of routine patient care. 

We estimate that there are 359,000 IRF-PAI submissions per year 32 and that there are 

1161 IRFs in the U.S. reporting quality data to CMS. Based on these figures, we estimate that 

each IRF will submit approximately 309 IRF-PAIs per year or 26 IRF-PAIs per month. 

33Assuming that each IRF-PAI submission requires 25 minutes of time by an RN at an average 

 

32 MedPAC, A Data Book: Health Care Spending and the Medicare Program (June 2012), 

http://www.medpac.gov/chapters/Jun12DataBookSec8.pdf

33 359,000 IRF-PAIs per all IRFs per year / 1161 IRFs in U.S. = 309 IRF-PAIs per each IRF per year 

 309 IRF-PAI reports per IRF per year / 12 months per year = 26 IRF-PAI reports per each IRF per year 
 148

hourly wage of $33.2334, the yearly cost to each IRF would be $4,278.36 35 and the annualized 

cost across all IRFs would be $4,967,176.36

We also expect that most IRFs will use administrative personnel, such as a medical 

secretary or medical data entry clerk, to perform the task of entering the IRF-PAI pressure ulcer 

assessment data into their electronic health record (EHR) system and/or the CMS JIRVEN 

program. We estimate that this data entry task will take no more than 3 minutes per each IRFPAI record or 15.45 hours per each IRF annually or 17,937 hours across all IRFs. As noted 

above, the average hourly wage for a Medical Records & Health Information Technician is 

$15.55. As we noted above, there are approximately 359,000 IRF-PAI submissions per year and 

1161 IRFs reporting quality data to CMS. Given this wage information, the estimated total 

annual cost across all reporting IRFs for the time required for entry of pressure ulcer data into the 

IRF-PAI record is $278,930. We further estimate the average yearly cost to each individual IRF 

to be $240.25. 

We estimate that the combined annualized time burden related to the pressure ulcer data 

item set for work performed, by the both clinical and administrative staff will be 144.20 hours 

for each individual IRF and 167,416 hours across all IRFs. The total estimated annualized cost 

for collection and submission of pressure ulcer data is $4,518.61 for each IRF and $5,246,106 

across all IRFs. We estimate the cost for each pressure ulcer submission to be $14.61. 

We are proposing to revise the IRF-PAI instrument to include the data set associated with 

this measure. 

 

34 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Registered Nurse is $33.23. (See 

http://www.bls.gov/oes/2011/may/oes291111.htm ) 

35 25 minutes x 309 IRF-PAI assessments per each IRF per year = 7,725 minutes per each IRF per year 

 7,725 minutes per each IRF per year / 60 minutes per hour = 128.75 hours per each IRF per year 

 128.75 hours per year x $33.23 per hour = $4,278.36 nursing wages per each IRF per year

36 $4,278.36 x 1161 IRF providers = $4,967,176 per all IRFs per year 
 149

2. Percent of Residents or Patients Who Were Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short-Stay) (NQF #0680) 

In section XIII. of the of this proposed rule, we have proposed to add the measure, 

Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal 

Influenza Vaccine (Short-Stay) (NQF #0680) to the IRF QRP. We have further proposed to add 

a new set of standardized data elements now used in the MDS 3.0 to the IRF-PAI to collect the 

data required for this measure. 

As noted above, IRFs are already required to complete and transmit certain IRF-PAI data 

on all Medicare Part A fee-for-service and Medicare Part C (Medicare Advantage) patients to 

receive payment from Medicare. By building upon preexisting resources for data collection and 

submission, we intend to reduce administrative burden related to data collection and submission. 

We anticipate that the initial setup and acclimation to data collection through the IRF-PAI for 

purposes of reporting of IRF quality measure data will have already occurred with the adoption 

of the Pressure Ulcer measure for the IRF QRP for the FY 2014 payment determination. 

Therefore, we believe the transition to reporting an additional measure via the IRF-PAI may be 

less burdensome. 

We estimate that completion of the patient influenza measure item set will take 

approximately 5 minutes to complete. The patient influenza item set consists of three items 

(questions). Each item is straightforward and does not require physical assessment for 

completion. We estimate that it will take approximately 0.7 minutes to complete each item, or 

2.1 minutes to complete the entire item set. However, in some cases, the person completing this 

item set may need to consult the patient’s medical record to obtain data about the patient’s 

influenza vaccination. Therefore, we have allotted 1.6 minutes per items or a total of 5 minutes 
 150

to complete the item set. 

IRF staff will be required to perform a full influenza assessment only during the influenza 

vaccination season. The CDC defines that influenza vaccination season as the time period from 

October 1st (or when the vaccine becomes available) through March 31 each year. From April 1st

through September 30th, IRFs are not required to perform full influenza screening and may skip 

to the next item set after checking the selection which indicates that the patient’s IRF stay 

occurred outside of the influenza vaccination season. Our time estimate reflects the averaged 

amount of time necessary to complete the influenza item set both during and outside the 

influenza vaccination season. 

We anticipate that the patient influenza item set will be completed by a clinician such an 

RN, while completing the Quality indicator section of the IRF-PAI. It is most appropriate for an 

RN to complete the influenza item set because it involves performing a skilled assessment to 

determine, from a patient’ records, whether the patient has received a vaccination and, if not, to 

discuss with the patient any medications or other related topics such as medication allergies, 

other vaccinations that the patient may have had, and any contraindications that might exist for 

receiving the influenza vaccination. The nurse has knowledge and experience to determine the 

relevance of this information to the patient influenza items and also determine if the patient 

should be given the influenza vaccination. 

As noted above, we estimate that it will take approximately 5 minutes to complete the 

patient influenza measure item set. We have noted above that there are approximately 

359,000IRF-PAIs completed annually across all 1161 IRFs that report IRF quality data to CMS. 

This breaks down to approximately 309 IRF-PAIs completed by each IRF yearly37. We estimate 

 

37 359,000 IRF-PAI reports per all IRFs per year / 1161 IRFs in U.S. = 309 IRF-PAI reports per each IRF per year 
 151

that the annual time burden for reporting the patient influenza vaccination measure data is 29,896 

hours across all IRFs in the U.S. and 26 hours for each individual IRF. According to the U.S. 

Bureau of Labor, the hourly wage for a Registered Nurse is $33.23. Taking all of the above 

information into consideration, we estimate the annual cost across all IRFs for the submission of 

the patient influenza measure data to be $993,433. We further estimate the cost for each 

individual IRF to be $855.67. 

B. ICRs Regarding Non-Quality Related Proposed Changes to the IRF-PAI

We propose to revise several items on the IRF-PAI to provide greater clarity for 

providers. The proposed changes include updating several items regarding the response options 

available to providers. Additionally, we are proposing to remove several items that we believe 

are unnecessary for providers to continue documenting on the IRF-PAI since those items are 

already being documented in the patients’ medical record. We are also proposing to add several 

items, such as a signature page, to fulfill providers’ request to have an organized way to 

document who has assessed the patient and when that assessment took place. We do not 

estimate any additional burden for IRFs to complete the IRF-PAI as a result of these proposals. 

We estimate the time that will be needed to complete the new non-quality related proposed 

items, equals the time that was needed to complete the previous non-quality related items. When 

the original burden estimates were completed for the IRF-PAI, we estimated that the proposed 

deletion of the non-quality related items would take approximately 3 minutes to complete. Thus, 

removing these items the IRF-PAI would decrease the total estimated burden of completing the 

non-quality related portions of the IRF-PAI by 3 minutes. However, we estimate that it will take 

about 3 minutes to complete the new non-quality related items that we are proposing to add. 

Therefore, we estimate no net change in the amount of time associated with completing the non-
 152

quality related portions of the IRF-PAI and that the burden for completing these portions of the 

IRF-PAI will not change. 

We will be submitting a revision to the current IRF-PAI collection of information 

approval under (OMB control number 0938–0842) for OMB review and approval. 

 If you comment on these information collection and recordkeeping requirements, please 

do either of the following: 

1. Submit your comments electronically as specified in the ADDRESSES section of 

this proposed rule; or 

2. Submit your comments to the Office of Information and Regulatory Affairs, 

Office of Management and Budget, 

Attention: CMS Desk Officer, CMS-1448-P 

Fax: (202) 395-6974; or 

Email: OIRA_submission@omb.eop.govXV. Response to Public Comments

 Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. We will 

consider all comments we receive by the date and time specified in the “DATES” section of this 

preamble, and, when we proceed with a subsequent document, we will respond to the comments 

in the preamble to that document. 

XV. Response to Comments 

Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. We will 

consider all comments we receive by the date and time specified in the "DATES" section of this 

preamble, and, when we proceed with a subsequent document, we will respond to the comments 
 153

in the preamble to that document. 

XVI. Regulatory Impact Analysis 

A. Statement of Need

This proposed rule updates the IRF prospective payment rates for FY 2014 as required 

under section 1886(j)(3)(C) of the Act. It responds to section 1886(j)(5) of the Act, which 

requires the Secretary to publish in the Federal Register on or before the August 1 that precedes 

the start of each fiscal year, the classification and weighting factors for the IRF PPS’s case-mix 

groups and a description of the methodology and data used in computing the prospective 

payment rates for that fiscal year. 

This rule implements sections 1886(j)(3)(C) and (D) of the Act. 

Section 1886(j)(3)(C)(ii)(I) of the Act requires the Secretary to apply a multi-factor productivity 

adjustment to the market basket increase factor, and to apply other adjustments as defined by the 

Act. The productivity adjustment applies to FYs from 2012 forward. The other adjustments 

apply to FYs 2010 through 2019. 

This rule also proposes some policy changes within the statutory discretion afforded to 

the Secretary under section 1886(j) of the Act. We propose to revise the list of diagnosis codes 

that are eligible under the “60 percent rule,” update the IRF facility-level adjustment factors, 

revise sections of the Inpatient Rehabilitation Facility-Patient Assessment Instrument, revise 

requirements for acute care hospitals that have IRF units, clarify the IRF regulation text 

regarding limitation of review, and revise and update quality measures under the IRF quality 

reporting program. We believe that the proposed policy changes would enhance the clarity, 

accuracy, and fairness of the IRF PPS. 
 154

B. Overall Impacts

 We have examined the impacts of this proposed rule as required by Executive Order 

12866 (September 30, 1993, Regulatory Planning and Review), Executive Order 13563 on 

Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96-354)(RFA), section 1102(b) of the Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism 

(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). 

 Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of 

available regulatory alternatives and, if regulation is necessary, to select regulatory approaches 

that maximize net benefits (including potential economic, environmental, public health and 

safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the 

importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and 

of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for a major 

proposed rule with economically significant effects ($100 million or more in any one year). We 

estimate the total impact of the proposed policy updates described in this proposed rule by 

comparing the estimated payments in FY 2014 with those in FY 2013. This analysis results in an 

estimated $150 million increase for FY 2014 IRF PPS payments. As a result, this proposed rule 

is designated as economically “significant” under section 3(f)(1) of Executive Order 12866, and 

hence a major rule under the Congressional Review Act. 

The Regulatory Flexibility Act (RFA) requires agencies to analyze options for regulatory 

relief of small entities, if a rule has a significant impact on a substantial number of small entities. 

For purposes of the RFA, small entities include small businesses, nonprofit organizations, and 

small governmental jurisdictions. Most IRFs and most other providers and suppliers are small 
 155

entities, either by having revenues of $7 million to $34.5 million in any 1 year, or by being 

nonprofit organizations that are not dominant in their markets. (For details, see the Small 

Business Administration's final rule that set forth size standards for health care industries, at 

65 FR 69432 at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf , effective 

March 26, 2012.) Because we lack data on individual hospital receipts, we cannot determine the 

number of small proprietary IRFs or the proportion of IRFs' revenue that is derived from 

Medicare payments. Therefore, we assume that all IRFs (an approximate total of 1,200 IRFs, of 

which approximately 60 percent are nonprofit facilities) are considered small entities and that 

Medicare payment constitutes the majority of their revenues. The Department of Health and 

Human Services generally uses a revenue impact of 3 to 5 percent as a significance threshold 

under the RFA. As shown in Table 16, we estimate that the net revenue impact of this proposed 

rule on all IRFs is to increase estimated payments by approximately 2.0 percent. However, we 

find that certain categories of IRF providers would be expected to experience revenue impacts in 

the 3 to 5 percent range. We estimate a 4.3 percent overall impact for teaching IRFs with 

resident to average daily census ratios of 10 to 19 percent, a9.3 percent overall impact for 

teaching IRFs with a resident to average daily census ratio greater than 19 percent, and a 3.5 

percent overall impact for IRFs with a DSH patient percentage of 0 percent. As a result, we 

anticipate this proposed rule would have a positive impact on a substantial number of small 

entities. Medicare fiscal intermediaries, Medicare Administrative Contractors, and carriers are 

not considered to be small entities. Individuals and States are not included in the definition of a 

small entity. 

 In addition, section 1102(b) of the Act requires us to prepare a regulatory impact 

analysis if a rule may have a significant impact on the operations of a substantial number of 
 156

small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. 

For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is 

located outside of a Metropolitan Statistical Area and has fewer than 100 beds. As discussed in 

detail below, the rates and policies set forth in this proposed rule would not have a significant 

impact (not greater than 3 percent) on rural hospitals based on the data of the 167 rural units and 

18 rural hospitals in our database of 1,132 IRFs for which data were available. 

 Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-04, enacted 

on March 22, 1995) also requires that agencies assess anticipated costs and benefits before 

issuing any rule whose mandates require spending in any one year of $100 million in 1995 

dollars, updated annually for inflation. In 2013, that threshold level is approximately 

$141 million. This proposed rule will not impose spending costs on State, local, or tribal 

governments, in the aggregate, or by the private sector, of greater than $141 million. 

 Executive Order 13132 establishes certain requirements that an agency must meet when 

it promulgates a final rule that imposes substantial direct requirement costs on state and local 

governments, preempts state law, or otherwise has federalism implications. As stated above, this 

proposed rule will not have a substantial effect on State and local governments, preempt state 

law, or otherwise have a federalism implication. 

C. Detailed Economic Analysis 

1. Basis and Methodology of Estimates 

This proposed rule sets forth proposed policy changes and updates to the IRF PPS rates 

contained in the FY 2013 notice (77 FR 44618). Specifically, this proposed rule proposes 

updates to the CMG relative weights and average length of stay values, the facility-level 

adjustment factors, the wage index, and the outlier threshold for high-cost cases. This proposed 
 157

rule also applies a productivity adjustment to the FY 2014 RPL market basket increase factor in 

accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 0.3 percentage point reduction to 

the FY 2014 RPL market basket increase factor in accordance with sections 1886(j)(3)(C)(ii)(II) 

and (D)(ii) of the Act. Further, this proposed rule contains proposed changes to the list of 

ICD-9-CM codes that are used in the 60 percent rule presumptive methodology and, in 

section XII of this rule. discusses the first implementation (in FY 2014) of the required 

2 percentage point reduction of the market basket increase factor for any IRF that fails to meet 

the IRF quality reporting requirements, in accordance with section 1886(j)(7) of the Act. 

 We estimate that the impact of the proposed changes and updates described in this 

proposed rule would be a net estimated increase of $150 million in payments to IRF providers. 

This estimate does not include the estimated impacts of the proposed changes to the list of 

ICD-9-CM codes that are used in the 60 percent rule presumptive compliance (as discussed 

below) or the estimated impacts of the implementation (in FY 2014) of the required 2 percentage 

point reduction of the market basket increase factor for any IRF that fails to meet the IRF quality 

reporting requirements (as discussed in below). The impact analysis in Table 16 of this proposed 

rule represents the projected effects of the proposed updates to IRF PPS payments for FY 2014 

compared with the estimated IRF PPS payments in FY 2013. We determine the effects by 

estimating payments while holding all other payment variables constant. We use the best data 

available, but we do not attempt to predict behavioral responses to these changes, and we do not 

make adjustments for future changes in such variables as number of discharges or case-mix. 

 We note that certain events may combine to limit the scope or accuracy of our impact 

analysis, because such an analysis is future-oriented and, thus, susceptible to forecasting errors 

because of other changes in the forecasted impact time period. Some examples could be 
 158

legislative changes made by the Congress to the Medicare program that would impact program 

funding, or changes specifically related to IRFs. Although some of these changes may not 

necessarily be specific to the IRF PPS, the nature of the Medicare program is such that the 

changes may interact, and the complexity of the interaction of these changes could make it 

difficult to predict accurately the full scope of the impact upon IRFs. 

 In updating the rates for FY 2014, we are proposing standard annual revisions described 

in this proposed rule (for example, the update to the wage and market basket indexes used to 

adjust the Federal rates). We are also implementing a productivity adjustment to the FY 2014 

RPL market basket increase factor in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and 

a 0.3 percentage point reduction to the FY 2014 RPL market basket increase factor in accordance 

with sections 1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act. We estimate the total increase in 

payments to IRFs in FY 2014, relative to FY 2013, would be approximately $150 million. 

 This estimate is derived from the application of the FY 2014 RPL market basket increase 

factor, as reduced by a productivity adjustment in accordance with section 1886(j)(3)(C)(ii)(I) of 

the Act, and a 0.3 percentage point reduction in accordance with sections 1886(j)(3)(C)(ii)(II) 

and (D)(ii) of the Act, which yields an estimated increase in aggregate payments to IRFs of 

$135 million. Furthermore, there is an additional estimated $15 million increase in aggregate 

payments to IRFs due to the proposed update to the outlier threshold amount. Outlier payments 

are estimated to increase under this proposal from approximately 2.8 percent in FY 2013 to 

3.0 percent in FY 2014. Therefore, summed together, we estimate that these updates will result 

in a net increase in estimated payments of $150 million from FY 2013 to FY 2014. 
 159

 The effects of the proposed updates that impact IRF PPS payment rates are shown in 

Table 16. The following proposed updates that affect the IRF PPS payment rates are discussed 

separately below: 

• The effects of the proposed update to the outlier threshold amount, from 

approximately 2.8 percent to 3.0 percent of total estimated payments for FY 2014, consistent 

with section 1886(j)(4) of the Act. 

• The effects of the proposed annual market basket update (using the RPL market 

basket) to IRF PPS payment rates, as required by section 1886(j)(3)(A)(i) and sections 

1886(j)(3)(C) and (D) of the Act, including a productivity adjustment in accordance with section 

1886(j)(3)(C)(i)(I) of the Act, and a 0.3 percentage point reduction in accordance with sections 

1886(j)(3)(C) and (D) of the Act. 

• The effects of applying the proposed budget-neutral labor-related share and wage 

index adjustment, as required under section 1886(j)(6) of the Act. 

• The effects of the proposed budget-neutral changes to the CMG relative weights and 

average length of stay values, under the authority of section 1886(j)(2)(C)(i) of the Act. 

• The effects of the proposed updates to the Rural, LIP, and Teaching Status adjustment 

factors, using an updated methodology. 

• The total change in estimated payments based on the proposed FY 2014 payment 

changes relative to the estimated FY 2013 payments. 

2. Description of Table 16 

 Table 16 categorizes IRFs by geographic location, including urban or rural location, and 

location with respect to CMS's 9 census divisions (as defined on the cost report) of the country. 

In addition, the table divides IRFs into those that are separate rehabilitation hospitals (otherwise 
 160

called freestanding hospitals in this section), those that are rehabilitation units of a hospital 

(otherwise called hospital units in this section), rural or urban facilities, ownership (otherwise 

called for-profit, non-profit, and government), by teaching status, and by disproportionate share 

patient percentage (DSH PP). The top row of Table 16 shows the overall impact on the 1,132 

IRFs included in the analysis. 

 The next 12 rows of Table 16 contain IRFs categorized according to their geographic 

location, designation as either a freestanding hospital or a unit of a hospital, and by type of 

ownership; all urban, which is further divided into urban units of a hospital, urban freestanding 

hospitals, and by type of ownership; and all rural, which is further divided into rural units of a 

hospital, rural freestanding hospitals, and by type of ownership. There are 947 IRFs located in 

urban areas included in our analysis. Among these, there are 731 IRF units of hospitals located 

in urban areas and 216 freestanding IRF hospitals located in urban areas. There are 185 IRFs 

located in rural areas included in our analysis. Among these, there are 167 IRF units of hospitals 

located in rural areas and 18 freestanding IRF hospitals located in rural areas. There are 299 forprofit IRFs. Among these, there are 260 IRFs in urban areas and 39 IRFs in rural areas. There 

are 685 non-profit IRFs. Among these, there are 570 urban IRFs and 115 rural IRFs. There are 

148 government-owned IRFs. Among these, there are 117 urban IRFs and 31 rural IRFs. 

The remaining four parts of Table 16 show IRFs grouped by their geographic location 

within a region, by teaching status, and by DSH PP. First, IRFs located in urban areas are 

categorized with respect to their location within a particular one of the nine Census geographic 

regions. Second, IRFs located in rural areas are categorized with respect to their location within 

a particular one of the nine Census geographic regions. In some cases, especially for rural IRFs 

located in the New England, Mountain, and Pacific regions, the number of IRFs represented is 
 161

small. IRFs are then grouped by teaching status, including non-teaching IRFs, IRFs with an 

intern and resident to average daily census (ADC) ratio less than 10 percent, IRFs with an intern 

and resident to ADC ratio greater than or equal to 10 percent and less than or equal to 19 percent, 

and IRFs with an intern and resident to ADC ratio greater than 19 percent. Finally, IRFs are 

grouped by DSH PP, including IRFs with zero DSH PP, IRFs with a DSH PP less than 5 percent, 

IRFs with a DSH PP between 5 and less than 10 percent, IRFs with a DSH PP between 10 and 

20 percent, and IRFs with a DSH PP greater than 20 percent. 

The estimated impacts of each proposed policy described in this proposed rule to the 

facility categories listed above are shown in the columns of Table 16. The description of each 

column is as follows: 

● Column (1) shows the facility classification categories described above. 

● Column (2) shows the number of IRFs in each category in our FY 2012 analysis file. 

● Column (3) shows the number of cases in each category in our FY 2012 analysis file. 

● Column (4) shows the estimated effect of the proposed adjustment to the outlier 

threshold amount. 

● Column (5) shows the estimated effect of the proposed update to the IRF PPS payment 

rates, which includes a productivity adjustment in accordance with section 1886(j)(3)(C)(ii)(I) of 

the Act, and a 0.3 percentage point reduction in accordance with sections 1886(j)(3)(C)(ii)(II) 

and (D)(ii) of the Act. 

● Column (6) shows the estimated effect of the proposed update to the IRF labor-related 

share and wage index, in a budget neutral manner. 

● Column (7) shows the estimated effect of the proposed update to the CMG relative 

weights and average length of stay values, in a budget neutral manner. 
 162

● Column (8) shows the estimated effect of the proposed update to the facility 

adjustment factors using an updated methodology, in a budget neutral manner. 

● Column (9) compares our estimates of the payments per discharge, incorporating all of 

the proposed policies reflected in this proposed rule for FY 2014 to our estimates of payments 

per discharge in FY 2013. 

The average estimated increase for all IRFs is approximately 2.0 percent. This estimated 

net increase includes the effects of the proposed RPL market basket increase factor for FY 2014 

of 2.5 percent, reduced by a productivity adjustment of 0.4 percentage point in accordance with 

section 1886(j)(3)(C)(ii)(I) of the Act, and further reduced by 0.3 percentage point in accordance 

with sections 1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act. It also includes the approximate 0.2 

percent overall estimated increase in estimated IRF outlier payments from the proposed update to 

the outlier threshold amount. Since we are making the proposed updates to the IRF wage index, 

the facility-level adjustments, and the CMG relative weights in a budget-neutral manner, they 

would not be expected to affect total estimated IRF payments in the aggregate. However, as 

described in more detail in each section, they would be expected to affect the estimated 

distribution of payments among providers. 
 163

TABLE 16: IRF Impact Table for FY 2014 (Columns 4-9 in %) 

Facility 

Classification 

Number 

of 

IRFs 

Number 

of 

cases Outlier 

Adjusted 

Market 

Basket 

Increase 

Factor 

for FY 

20141 

FY 2014 

CBSA 

wage index 

and laborshare CMG Facility 

Adjust. 

Total 

Percent 

Change 

(1) (2) (3) (4) (5) (6) (7) (8) (9) 

Total 

 

1,132 

 

380,988 0.2 1.8 0.0 0.0 0.0 2.0 

Urban unit 

 

731 

 

180,061 0.3 1.8 0.0 0.0 0.2 2.5 

Rural unit 

 

167 

 

26,894 0.2 1.8 0.1 0.1 -2.8 -0.7 

Urban hospital 

 

216 

 

168,159 0.1 1.8 -0.1 0.0 0.3 2.1 

Rural hospital 

 

18 

 

5,874 0.1 1.8 -0.2 -0.1 -3.4 -1.9 

Urban ForProfit  

260 

 

142,026 0.1 1.8 -0.2 0.0 0.3 2.0 

Rural ForProfit  

39 

 

8,184 0.1 1.8 0.0 0.0 -3.3 -1.4 

Urban NonProfit  

570 

 

177,533 0.3 1.8 0.2 0.0 0.3 2.5 

Rural NonProfit  

115 

 

19,523 0.2 1.8 0.0 0.0 -2.8 -0.8 

Urban 

Government 

 

117 

 

28,661 0.3 1.8 -0.2 0.0 0.3 2.3 

Rural 

Government 

 

31 

 

5,061 0.3 1.8 0.1 0.1 -3.0 -0.7 

Urban 

 

947 

 

348,220 0.2 1.8 0.0 0.0 0.3 2.3 

Rural 

 

185 

 

32,768 0.2 1.8 0.0 0.0 -2.9 -0.9 

Urban by 

region2 

Urban New 

England 

 

31 

 

16,756 0.1 1.8 0.8 0.0 0.1 2.7 

Urban Middle 

Atlantic 

 

140 

 

59,219 0.2 1.8 0.0 0.0 0.7 2.7 

Urban South 

Atlantic 

 

130 

 

62,331 0.1 1.8 -0.3 0.0 0.1 1.8 

Urban East 

North Central 

 

182 

 

52,383 0.3 1.8 0.2 0.0 0.6 2.9 

Urban East 

South Central 

 

49 

 

24,405 0.1 1.8 -0.8 0.0 0.5 1.6 

Urban West 

North Central 

 

73 

 

17,946 0.2 1.8 0.5 0.0 0.0 2.5 

Urban West 

South Central 

 

171 

 

67,357 0.2 1.8 -0.1 0.0 0.4 2.3 

Urban 

Mountain 

 

72 

 

23,318 0.3 1.8 -0.5 0.0 0.2 1.7 
 164

Facility 

Classification 

Number 

of 

IRFs 

Number 

of 

cases Outlier 

Adjusted 

Market 

Basket 

Increase 

Factor 

for FY 

20141 

FY 2014 

CBSA 

wage index 

and laborshare CMG Facility 

Adjust. 

Total 

Percent 

Change 

Urban Pacific 

 

99 

 

24,505 0.4 1.8 0.7 0.0 -0.8 2.1 

Rural by 

region2 

Rural New 

England 

 

6 

 

1,395 0.4 1.8 -0.4 -0.1 -2.1 -0.4 

Rural Middle 

Atlantic 

 

15 

 

2,702 0.2 1.8 -0.3 0.0 -2.6 -0.9 

Rural South 

Atlantic 

 

24 

 

5,546 0.1 1.8 0.0 0.1 -2.9 -0.9 

Rural East 

North Central 

 

32 

 

5,576 0.2 1.8 0.3 0.0 -2.8 -0.5 

Rural East 

South Central 

 

22 

 

3,834 0.2 1.8 0.0 0.1 -3.2 -1.2 

Rural West 

North Central 

 

27 

 

3,624 0.3 1.8 -0.7 0.0 -2.7 -1.4 

Rural West 

South Central 

 

48 

 

9,056 0.2 1.8 0.3 0.0 -3.5 -1.3 

Rural 

Mountain 

 

7 

 

660 0.4 1.8 0.3 0.2 -2.0 0.6 

Rural Pacific 

 

4 

 

375 0.8 1.8 0.1 -0.1 -1.3 1.3 

Teaching 

Status 

Non-teaching 

 

1,015 

 

332,827 0.2 1.8 0.0 0.0 -0.2 1.8 

Resident to 

ADC less than 

10% 

 

68 

 

32,835 0.2 1.8 0.1 0.0 0.6 2.7 

Resident to 

ADC 10%-

19% 

 

37 

 

13,743 0.3 1.8 0.1 0.0 2.1 4.3 

Resident to 

ADC greater 

than 19% 

 

12 

 

1,583 0.2 1.8 0.4 0.0 6.7 9.3 

Disproportio

nate Share 

Patient 

Percentage 

(DSH PP) 

DSH PP = 0% 

 

39 

 

7,929 0.8 1.8 0.2 0.0 0.7 3.5 

DSH PP less 

than 5% 

 

193 

 

64,712 0.2 1.8 0.0 0.0 0.9 2.8 

DSH PP 5% - 

10% 

 

323 

 

122,318 0.1 1.8 -0.1 0.0 0.4 2.3 

DSH PP 10% 0.2 1.8 0.1 0.0 0.0 2.0 
 165

Facility 

Classification 

Number 

of 

IRFs 

Number 

of 

cases Outlier 

Adjusted 

Market 

Basket 

Increase 

Factor 

for FY 

20141 

FY 2014 

CBSA 

wage index 

and laborshare CMG Facility 

Adjust. 

Total 

Percent 

Change 

- 20% 349 125,863 

DSH PP 

greater than 

20% 

 

228 

 

60,166 0.3 1.8 0.0 0.0 -1.3 0.7 1

This column reflects the impact of the RPL market basket increase factor for FY 2014 of 1.8 percent, which includes a market basket update of 

2.5 percent, a 0.3 percentage point reduction in accordance with sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act and a 

0.4 percentage point reduction for the productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the Act. 2

A map of states that comprise the 9 geographic regions can be found at 

(http://www.census.gov/geo/www/us_regdiv.pdf.) 
 166

3. Impact of the Proposed Update to the Outlier Threshold Amount 

The proposed outlier threshold adjustment is presented in column 4 of Table 16. In the 

FY 2013 IRF PPS notice (77 FR 44618), we used FY 2011 IRF claims data (the best, most 

complete data available at that time) to set the outlier threshold amount for FY 2013 so that 

estimated outlier payments would equal 3 percent of total estimated payments for FY 2013. 

For this proposed rule, we are proposing to update our analysis using FY 2012 IRF 

claims data and, based on this updated analysis, we estimate that IRF outlier payments as a 

percentage of total estimated IRF payments are 2.8 percent in FY 2013. Thus, we are proposing 

to adjust the outlier threshold amount in this proposed rule to set total estimated outlier payments 

equal to 3 percent of total estimated payments in FY 2014. The estimated change in total IRF 

payments for FY 2014, therefore, includes an approximate 0.2 percent increase in payments 

because the estimated outlier portion of total payments is estimated to increase from 

approximately 2.8 percent to 3 percent. 

The impact of this proposed outlier adjustment update (as shown in column 4 of 

Table 16) is to increase estimated overall payments to IRFs by about 0.2 percent. We estimate 

the largest increase in payments from the update to the outlier threshold amount to be 0.8 percent 

for rural IRFs in the Pacific region. We do not estimate that any group of IRFs would experience 

a decrease in payments from this proposed update. 

4. Impact of the Proposed Market Basket Update to the IRF PPS Payment Rates 

 The proposed market basket update to the IRF PPS payment rates is presented in column 

5 of Table 16. In the aggregate the proposed update would result in a net 1.8 percent increase in 

overall estimated payments to IRFs. This net increase reflects the estimated RPL market basket 

increase factor for FY 2014 of 2.5 percent, reduced by the 0.3 percentage point in accordance 
 167

with sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act, and further reduced by a 

0.4 percentage point productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the 

Act. 

5. Impact of the Proposed CBSA Wage Index and Labor-Related Share 

 In column 6 of Table 16, we present the effects of the proposed budget neutral update of 

the wage index and labor-related share. The proposed changes to the wage index and the laborrelated share are discussed together because the wage index is applied to the labor-related share 

portion of payments, so the proposed changes in the two have a combined effect on payments to 

providers. As discussed in section V.C. of this proposed rule, we propose to decrease the laborrelated share from 69.881 percent in FY 2013 to 69.658 percent in FY 2014. 

 In the aggregate, since these proposed updates to the wage index and the labor-related 

share are applied in a budget-neutral manner as required under section 1886(j)(6) of the Act, we 

do not estimate that these proposed updates would affect overall estimated payments to IRFs. 

However, we estimate that these proposed updates would have small distributional effects. For 

example, we estimate the largest increase in payments from the proposed update to the CBSA 

wage index and labor-related share of 0.8 percent for urban IRFs in the New England region. 

We estimate the largest decrease in payments from the update to the CBSA wage index and 

labor-related hare to be a 0.8 percent decrease for urban IRFs in the East South Central region. 

6. Impact of the Proposed Update to the CMG Relative Weights and Average Length of Stay 

Values. 

In column 7 of Table 16, we present the effects of the proposed budget neutral update of 

the CMG relative weights and average length of stay values. In the aggregate, we do not 

estimate that these proposed updates would affect overall estimated payments to IRFs. However, 
 168

we would expect these proposed update to have small distributional effects. Freestanding rural 

hospitals will see a 0.1 decrease in payments as a result of these updates. The rural areas affected 

are New England and Pacific. The largest estimated increase in payments as a result of these 

updates is a 0.2 increase in the Mountain region. 

7. Impact of the Proposed Updates to the Facility-Level Adjustments 

 In column 8 of Table 16, we present the effects of the proposed budget neutral updates to 

the IRF facility-level adjustment factors (the rural, LIP, and teaching status adjustment factors) 

for FY 2014. In the aggregate, we do not estimate that these proposed updates would affect 

overall estimated payments to IRFs. However, we estimate that these proposed updates would 

have distributional effects, as shown in Table 16. The largest estimated decrease in payments as 

a result of these proposed updates is a 3.5 percent decrease to rural IRFs in the West South 

Central region. The largest estimated increase in payments as a result of these proposed updates 

is a 6.7 percent increase for teaching IRFs with a resident to average daily census ratio greater 

than 19 percent. 

8. Impact of the Proposed Refinements to the Presumptive Compliance Criteria Methodology 

As discussed in section VII. of this proposed rule, we are proposing changes to the list of 

ICD-9-CM codes available to meet the presumptive compliance criteria. We believe that these 

proposed changes would affect all 1,132 IRFs, as these facilities would need to change their 

coding practices to continue to meet the 60 percent compliance percentage using the presumptive 

methodology. 

We estimate that the financial impact, in the absence of any behavioral responses to these 

proposed changes on the part of providers, would be a decrease of 6.9 percent (or $520 million) 

in overall estimated payments to IRFs. However, we believe that IRFs will be able to improve 
 169

the specificity of their coding practices, alter their admitting practices, meet the 60 percent 

compliance threshold under medical review, and make other modifications to their operations to 

continue to meet the 60 percent compliance threshold. 

For example, we estimate that about 92 percent of the IRF cases that would potentially be 

affected by the proposed revisions to the presumptive methodology codes are affected by the 

removal of the non-specific codes. However, we have been careful to propose removal only of 

those non-specific codes for which more specific codes for the same conditions will remain on 

the list of codes that meet the presumptive methodology. Thus, in all of these cases, we believe 

that the IRF will be able to switch to a more specific code for the same condition, leaving the 

IRF’s admission practices and classification status unaffected. However, we welcome comments 

on whether there are any particular non-specific codes or situations in which switching to a more 

specific code would be unusually difficult for an IRF. 

Fewer than 1 percent of the cases that we estimate would be affected by the proposed 

revisions are affected by the Unilateral Upper Extremity Amputation codes, the Congenital 

Anomaly codes, and the Miscellaneous codes combined. Thus, we do not estimate that the 

proposed removal of these code groups would have a significant effect on IRF admission or 

coding practices, or classification status. However, we welcome comments on whether 

individual IRFs may specialize in any of these conditions and might therefore be 

disproportionately affected by these proposed revisions. 

Finally, approximately 7 percent of the cases that we estimate would be affected by the 

proposed revisions involve arthritis diagnoses. We estimate that the proposed revisions in this 

category would have the largest potential effects on providers because, by the very nature of 

these revisions, IRFs would not have another arthritis code on the list to code instead. We 
 170

estimate that about 14 percent of all IRF cases are coded with the arthritis codes that we propose 

to remove from the list, and in 11 percent of these cases, the arthritis code is the only code that 

would qualify the patient as meeting the 60 percent rule requirements. However, for the arthritis 

category of codes, we estimate that most of these cases will still be found to meet the 60 percent 

rule requirements under medical review, so we estimate that these proposed revisions will lead to 

few if any IRF declassifications. However, we welcome comments on whether there are any 

reasons to believe that the arthritis cases may not generally be found to count towards the 

60 percent rule requirements under medical review. 

Historically, we have seen that IRFs adapt quickly to changes in the 60 percent rule, as 

evidenced by the rapid response to changes over time in the compliance threshold. Thus, we 

have every reason to believe that they will adapt quickly to the proposed changes to the 

presumptive methodology list. In addition, the proposed changes would not affect how many 

patients would ultimately be shown to meet the 60 percent rule criteria on medical review. For 

these reasons, we believe that our best estimate of the impact on IRFs of these changes is no net 

change in Medicare reimbursement payments. Instead, IRFs will quickly change their coding 

practices, admission practices, meet the 60 percent compliance threshold under medical review,

and make other changes to their business practice to ensure that they continue to meet the 60 

percent rule requirements; although we lack data to more precisely characterize the rule-induced 

costs, benefits and transfers that would be experienced by IRFs, their patients and other relevant 

entities, we note that the $520 million estimate appearing earlier in this section represents an 

upper bound (probably an extreme upper bound) on the costs that would be borne by IRFs. 

Should these proposed changes to the 60 percent rule be finalized, we intend to closely 

monitor provider coding practices to identify whether those patients that we envisioned would be 
 171

served under the IRF PPS are counting toward the presumptive compliance percentage. We will 

also monitor whether these proposed changes are having any unintended consequences in terms 

of limiting access to care. 

9. Effects of Proposed Updates to the IRF QRP 

In this rule, we are proposing to continue use of the pressure ulcer measure that was 

adopted in the FY 2012 IRF PPS final rule but have proposed to change this measure for the IRF 

PPS increase factor for FY 2017, at which time we are proposing to adopt the NQF-endorsed 

version of this measure. We are further proposing to make revisions to the pressure ulcer items 

on the IRF-PAI that providers will use to collect data for this measure. 

IRFs will incur some financial impact from the use of the pressure ulcer measure item set 

that will be incorporated into the IRF-PAI. We expect that the admission and discharge pressure 

ulcer data will be collected by a clinician such as a registered nurse (RN) because the assessment 

and staging of pressure ulcers requires a high degree of clinical judgment and experience. We 

estimate that it will take approximately 10 minutes of time by the RN to perform the admission 

pressure ulcer assessment. We further estimate that it will take 15 minutes of time to complete 

the discharge pressure ulcer assessment. During these time periods, the RN would be engaged in 

the collection of data for the purpose of the IRF quality reporting program and would not be 

performing patient care. An RN or clinician of a similar level of training and expertise should 

perform the pressure ulcer assessment and record this data on the IRF-PAI. 

We believe use of the NQF endorsed pressure ulcer measure will cause IRFs to incur 

additional annual financial burden in the amount of $4,518.61 and across all IRFs, $5,246,106. 

This burden is comprised of the clinical and administrative wages. The clinical wages are based 
 172

on an average hourly wage rate of $33.23.38 We estimate that there are 359,000 IRF-PAI 

submissions per year 39 and that there are 1161 IRFs in the U.S. that have reported quality data to 

CMS. Based on these figures, we estimate that each IRF will submit approximately 309 IRFPAIs per year or 25.75 IRF-PAIs per month.40 Assuming that each IRF-PAI submission requires 

25 minutes of time by an RN at an average hourly wage of $33.23, the yearly cost to each IRF 

would be $4,278.36 41 and the annualized cost across all IRFs would be $4,967,176.42 To 

calculate the total amount of administrative staff wages incurred, we estimate that this data entry 

task will take no more than 3 minutes per each IRF-PAI record or 15.45 hours per each IRF 

annually or 17,937 hours across all IRFs. According to the U.S. Bureau of Labor, the average 

hourly wage for Administrative Assistants is $15.55. As noted above, we have estimated that 

there are approximately 359,000 IRF-PAI submissions per year and 1161 IRFs in the U.S. that 

are reporting quality data to CMS. Given this wage information, the estimated total annual cost 

across all IRFs for the time required for entry of pressure ulcer data into the IRF-PAI record is 

$278,930. We further estimate the average yearly cost to each IRF to be $240.25. 

 We are also proposing to add 3 new quality measures to the IRF QRP. These proposed 

measures include: (1) Percent of Residents or Patients Who Were Assessed and Appropriately 

 

38 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Registered Nurse is $33.23. (See 

http://www.bls.gov/oes/2011/may/oes291111.htm ). 

39 MedPAC, A Data Book: Health Care Spending and the Medicare Program (June 2012), 

http://www.medpac.gov/chapters/Jun12DataBookSec8.pdf 

40 359,000 IRF-PAI reports per all IRFs per year / 1161 IRFs in U.S. = 309 IRF-PAI reports per each IRF per year 

309 IRF-PAI reports per IRF per year / 12 months per year = 26 IRF-PAI reports per each IRF per year 

41 25 minutes x 309 IRF-PAI assessments per each IRF per year = 7,725 minutes per each IRF per year 

 7,725 minutes per each IRF per year / 60 minutes per hour = 128.75 hours per each IRF per year 

 128.75 hours per year x $33.23 per hour = $4,278.36 nursing wages per each IRF per year 

42 $4,278.36 x 1161 IRF providers = $4,967,176 per all IRFs per year 
 173

Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #0680), which will affect the FY 2017 

increase factor; (2) Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431), 

which will affect the FY 2016 increase factor; and (3) an All-Cause Unplanned Readmission 

Measure for 30 Days Post Discharge from Inpatient Rehabilitation Facilities, which will affect 

the FY 2017 increase factor. We discuss the impact of each measure upon IRFs below. 

We have proposed that IRFs will submit their data for the patient influenza measure 

(NQF #0680) on the IRF-PAI. We have further proposed to add a new data item set consisting 

of 3 items to the IRF-PAI to collect the data for this measure. IRF staff will be required to 

perform a full influenza assessment only during the influenza vaccination season, which has been 

defined by the CDC as the time period from October 1st (or when the vaccine becomes available) 

through March 31 each year. From April 1st through September 30th, IRFs are not required to 

perform a full influenza screening. Our time estimate reflects the averaged amount of time 

necessary to complete the influenza item set both during and outside the influenza vaccination 

season. 

We believe that it will be most appropriate for a clinician, such as an RN, to complete the 

influenza items because this assessment requires clinical judgment and knowledge of 

vaccinations. An administrative employee, such as a medical data entry clerk or administrative 

assistant would not have this level of knowledge. We do not believe that IRFs will require 

additional time by administrative staff to encode and transmit this data to CMS, because 

submission of an IRF-PAI for each patient is already required as a condition for payment. 

We estimate that it will take approximately 5 minutes to complete the patient influenza 

measure item set. According to MedPAC, there are approximately 359,00043 IRF-PAIs 

 

43 MedPAC, A Data Book: Health Care Spending and the Medicare Program (June 2012), Page 129 
 174

completed annually across 1161 IRFs that reported quality data to CMS. This breaks down to 

approximately 309 IRF-PAIs completed by each IRF yearly. We estimate that the annual time 

burden for reporting the patient influenza vaccination measure data is 29,896 hours across all 

IRFs in the U.S. and 25.75 hours for each individual IRF. According to the U.S. Bureau of 

Labor, the hourly wage for a Registered Nurse is $33.23. The estimated annual cost across all 

IRFs in the U.S. for the submission of the patient influenza measure data is $993,433 and 

$855.67 for each individual IRF. 

 IRFs will submit their data for the staff immunization measure (NQF #0431) to the 

CDC’s healthcare acquired (HAI) surveillance website known as NHSN. Data collection for this 

measure is only required from October 1st (or when the vaccine becomes available) through 

March 31st each year, during which IRFs will be required to keep records of which staff 

members receive the influenza vaccination. However, IRFs are required to make one report to 

NHSN after the close of the reporting period on March 31st, by May 15th of each year. We do 

not believe that IRFs will incur any new burden associated with the collection of data during the 

influenza vaccination season. We believe that most IRFs already keep records related to the 

influenza vaccination of their staff because this impacts on many aspects of their business, 

including but not limited to staff absences, and transmission of illness to other staff and patients. 

We estimate that it will take each IRF approximately 15 minutes of time once per year to 

gather the data that was collected during the influenza vaccinations season, and prepare to make 

their report to NHSN. We do not estimate that it will take IRFs additional time to input their 

data into NHSN, once they have logged onto the system for the purpose of submitting their 

monthly CAUTI report. We believe that this task can be completed by an administrative person 

 

().(http://www.medpac.gov/chapters/Jun12DataBookSec8.pdf) 
 175

such as a Medical Secretary Medical Data Entry Clerk. As noted above, the average hourly 

wage for Medical Records or Health Information Technicians is $15.55.44 We estimate that the 

average yearly cost to each IRF for the reporting of this measure will be $3.98 45 and the cost 

across all IRFs will be $4,62146. 

The proposed readmission measure is a claims based measure and, therefore, IRFs are not 

required to submit any data for this measure. We do not anticipate that IRFs will be impacted by 

any financial or time burdens as a result of the use of this measure for the IRF QRP. 

The IRF QRP was established under section 3004 of the Affordable Care Act (which 

added Section 1886(j)(7)(A)(i) to the Act). Section 1886(j)(7)(A)(i) requires the reduction of the 

applicable IRF PPS increase factor, as previously modified under section 1886(j)(3)(D) of the 

Act, by 2 percentage points for any IRFs that fail to submit data to the Secretary in accordance 

with requirements established by the Secretary for that fiscal year. 

Over the past 18 months, we have received a great deal of positive feedback from IRFs 

about the IRF QRP, and overall, IRFs have been very receptive to the introduction of the ACA 

3004 IRF QRP into the IRF setting. The IRF provider community has shared many suggestions 

and ideas related to the IRF QRP. Outreach activities, such as a one day in-person training, and 

six open door forums were well attended. Given the amount of positive feedback and 

willingness to participate in the IRF QRP that has been demonstrated by IRFs, we anticipate that 

there will be a relatively small number of IRFs that fail to report the required type and amount of 

quality data. If finalized, our proposed reconsideration process would allow IRFs that receive an 

 

44 According to the U.S. Bureau of Labor Statistics, the mean hourly wage for a Medical Records & Health 

Information Technician is $15.55. See: http://www.bls.gov/ooh/healthcare/medical-records-and-health-informationtechnicians.htm .

45 15 minutes Admin staff time to collect and report staff influenza measure @ $15.55 per hour = $3.98 per IRF per 

year 

46 $3.98 per IRF per year x 1161 IRFs in U.S.= $4,621. 
 176

initial finding of non-compliance an opportunity to file a request for reconsideration of this 

finding. 

10. Impact of the Implementation of the 2 Percentage Point Reduction in the Increase Factor for 

Failure to Meet the IRF Quality Reporting Requirements 

As discussed in section XIII. of this proposed rule and in accordance with section 

1886(j)(7) of the Act, we will implement a 2 percentage point payment reduction in FY 2014 for 

IRFs that fail to report the required quality reporting data to us during the first IRF quality 

reporting period (from October 1, 2012 through December 31, 2012). In section XIII., we 

discuss how the 2 percentage point payment reduction will be applied. Currently, we cannot 

estimate the overall financial impacts of the application of this reduction on aggregate IRF PPS 

payments or on the distribution of IRF PPS payments among providers because we cannot 

predict the number of or types of IRFs that will fail to report the required quality reporting data. 

IRFs are currently required to complete the non-quality portions of the IRF-PAI to receive 

payment for all Medicare fee-for-service admissions. Therefore, we estimate that the number of 

IRFs that would fail to submit the additional quality reporting data on the IRF-PAI form is very 

low. Additionally, the Catheter Associated Urinary Tract Infections (CAUTI) quality reporting 

requirement would require IRFs to register with the National Healthcare Safety Network 

(NHSN) to submit the required data. At this time, we cannot predict how many IRFs would fail 

to register. 

The official reporting period end date for the first IRF quality reporting period is 

May 15, 2013. We expect a preliminary report of the IRFs that have failed to report the required 

data during the first quality reporting period to be developed by mid-June 2013. However, that 

list could change substantially during the proposed reconsideration process (described in section 
 177

XIII. of this proposed rule) that would occur between June 2013 and September 2013. 

Therefore, we intend to closely monitor the effects of this new quality reporting program on IRF 

providers as we cannot predict the number of, or types of IRFs that would fail to report the 

required quality reporting data for the first quality reporting period. 

D. Alternatives Considered

 As stated in section XV.B. of this proposed rule, we estimate that the proposed changes 

discussed in the rule would result in a significant economic impact on IRFs. The overall impact 

on all IRFs is an estimated increase in FY 2014 payments of $150 million (2.0 percent), relative 

to FY 2013. The following is a discussion of the alternatives considered for the proposed IRF 

PPS updates contained in this proposed rule. 

 Section 1886(j)(3)(C) of the Act requires the Secretary to update the IRF PPS payment 

rates by an increase factor that reflects changes over time in the prices of an appropriate mix of 

goods and services included in the covered IRF services. Thus, we did not consider alternatives 

to updating payments using the estimated RPL market basket increase factor for FY 2014. 

However, as noted previously in this proposed rule, section 1886(j)(3)(C)(ii)(I) requires the 

Secretary to apply a productivity adjustment to the market basket increase factor for FY 2014 

and sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act require the Secretary to apply a 

0.3 percentage point reduction to the market basket increase factor for FY 2014. Thus, in 

accordance with section 1886(j)(3)(C) of the Act, we proposed to update IRF federal prospective 

payments in this proposed rule by 1.8 percent (which equals the 2.5 percent estimated RPL 

market basket increase factor for FY 2014 reduced by 0.3 percentage points, and further reduced 

by a 0.4 percentage point productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of 

the Act). 
 178

 We considered maintaining the existing CMG relative weights and average length of stay 

values for FY 2014. However, in light of recently available data and our desire to ensure that the 

CMG relative weights and average length of stay values are as reflective as possible of recent 

changes in IRF utilization and case mix, we believe that it is appropriate to propose to update the 

CMG relative weights and average length of stay values at this time to ensure that IRF PPS 

payments continue to reflect as accurately as possible the current costs of care in IRFs. 

 We considered maintaining the current facility-level adjustment factors (that is, the rural 

factor at 18.4 percent, the LIP factor at 0.4613, and teaching status adjustment factor at 0.6876) 

for an additional year. However, as discussed in more detail in section IV.B. of this proposed 

rule, our recent research efforts have shown significant differences in cost structures between 

freestanding IRFs and IRF units of acute care hospitals (and CAHs). We have found that these 

cost structure differences substantially influence the estimates of the adjustment factors. For this 

reason, our regression analysis found that the proposed inclusion of the control variable for a 

facility’s status as either a freestanding IRF hospital or an IRF unit of an acute care hospital (or a 

CAH) would greatly enhance the accuracy of the adjustment factors for FY 2014, as we 

incorporate updated data. Further, as noted previously, we received comments from an IRF 

industry association on the FY 2012 IRF PPS proposed rule suggesting this enhancement to the 

methodology. Thus, we believe that the best approach at this time is to propose to update the 

facility-level adjustment factors for FY 2014 using this proposed enhancement to the 

methodology. However, we welcome comments on this approach and on whether or not the 

facility-level adjustment factors need updating at this time or should be frozen at their current 

levels for an additional year. 
 179

 We considered maintaining the existing outlier threshold amount for FY 2014. However, 

analysis of updated FY 2012 data indicates that estimated outlier payments would be lower than 

3 percent of total estimated payments for FY 2013, by approximately 0.2 percent, unless we 

updated the outlier threshold amount. Consequently, we propose adjusting the outlier threshold 

amount in this proposed rule to reflect a 0.2 percent increase thereby setting the total outlier 

payments equal to 3 percent, instead of 2.8 percent, of aggregate estimated payments in 

FY 2014. 

 Finally, we considered maintaining the current list of ICD-9-CM codes used to determine 

an IRF’s compliance with the 60 percent rule under the presumptive methodology, or 

maintaining some of the categories of codes that we are proposing to remove from the list in this 

proposed rule. However, we believe that the specific ICD-9-CM code removals that we are 

proposing in section VII. of this proposed rule would result in a list that better reflects the 

60 percent rule regulations. For example, the proposed removal of the non-specific diagnosis 

codes (as discussed in section VII. of this proposed rule) is in accordance with the trend toward 

requiring more specific coding in other Medicare payment settings, such as the IPPS. We 

believe that the incentives to use more specific codes, whenever possible, will also lead to 

improvements in the quality of care for patients by providing more detailed information that 

medical personnel can use to enhance the specificity of patients’ care plans. In addition, the 

proposed removal of the arthritis diagnosis codes (as discussed in section VII. of this proposed 

rule) would enable CMS to ensure that we only count patients as meeting the 60 percent rule 

requirements if they have met the necessary severity and prior treatment requirements, 

information which is not discernible from the ICD-9-CM codes themselves. With respect to the 

other code categories that we are proposing to remove from the presumptive methodology list, 
 180

we do not believe that patients who are coded with these codes would typically require treatment 

in an IRF, as described in more detail in section VII. of this proposed rule. However, we 

welcome comments on whether there are any specific reasons that we may not have previously 

considered that would argue for keeping certain of these codes on the presumptive methodology 

list. 

E. Accounting Statement. 

 As required by OMB Circular A-4 (available at 

http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in Table 

17, we have prepared an accounting statement showing the classification of the expenditures 

associated with the provisions of this proposed rule. Table 17 provides our best estimate of the 

increase in Medicare payments under the IRF PPS as a result of the proposed updates presented 

in this proposed rule based on the data for 1,132 IRFs in our database. 

TABLE 17: Accounting Statement: Classification of Estimated Expenditures, from the 

2013 IRF PPS Fiscal Year to the 2014 IRF PPS Fiscal Year 

Category Transfers 

Annualized Monetized Transfers $150 million 

From Whom to Whom? Federal Government to IRF Medicare 

Providers 

Estimated annualized cost to the federal 

government for the administration of the IRF 

quality reporting program 

$2 million 

(This cost is attributed to various sources, 

including but not limited to the CCSQ 

IRF measure developer contractor and the 

Division of National Systems) 

F. Conclusion

 Overall, the estimated payments per discharge for IRFs in FY 2014 are projected to 

increase by 2.0 percent, compared with the estimated payments in FY 2013, as reflected in 

column 9 of Table 16. IRF payments per discharge are estimated to increase 2.3 percent in urban 
 181

areas and decrease 0.9 percent in rural areas, compared with estimated FY 2013 payments. 

Payments per discharge to rehabilitation units are estimated to increase 2.5 percent in urban areas 

and decrease 0.7 percent in rural areas. Payments per discharge to freestanding rehabilitation 

hospitals are estimated to increase 2.1 percent in urban areas and decrease 1.9 percent in rural 

areas. 

 Overall, IRFs are estimated to experience a net increase in payments as a result of the 

proposed policies in this proposed rule. The largest payment increase is estimated to be a 

2.9 percent increase for urban IRFs located in the East North Central region. This is due to the 

large positive effect of the facility adjustment updates for urban IRFs in this region. 

 In accordance with the provisions of Executive Order 12866, this proposed rule was 

reviewed by the Office of Management and Budget. 
 182

List of Subjects in 42 CFR Part 412 

 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, 

Reporting and recordkeeping requirements. 
 183

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services 

proposes to amend 42 CFR chapter IV as follows: 

PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

 1. The authority citation for part 412 continues to read as follows: 

Authority: Sections 1102, 1862, and 1871 of the Social Security Act (42 U.S.C. 1302, 

1395y, and 1395hh). 

2. Section 412.25 is amended by revising paragraph (a)(1)(iii) to read as follows: 

§412.25 Excluded hospital units: Common requirements. 

(a) * * * 

(1) * * * 

(iii) Unless it is a unit in a critical access hospital, the hospital of which an IRF is a unit 

must have at least 10 staffed and maintained hospital beds that are not excluded from the 

inpatient prospective payment system, or at least 1 staffed and maintained hospital bed for every 

10 certified inpatient rehabilitation facility beds, whichever number is greater. Otherwise, the 

IRF will be classified as an IRF hospital, rather than an IRF unit. In the case of an IPF unit, the 

hospital must have enough beds that are not excluded from the inpatient prospective payment 

system to permit the provision of adequate cost information, as required by §413.24(c) of this 

chapter. 

* * * * * 

 3. Section 412.29 is amended by revising paragraph (d) to read as follows: 

§412.29 Classification criteria for payment under the inpatient rehabilitation facility 

prospective payment system. 
 184

* * * * * 

(d) Have in effect a preadmission screening procedure under which each prospective 

patient’s condition and medical history are reviewed to determine whether the patient is likely to 

benefit significantly from an intensive inpatient hospital program. This procedure must ensure 

that the preadmission screening for each Medicare Part A fee-for-service patient is reviewed and 

approved by a rehabilitation physician prior to the patient’s admission to the IRF. 

* * * * * 

4. Section 412.130 is amended by revising paragraphs (a)(1), (a)(2) and (a)(3) to read as 

follows: 

§412.130 Retroactive adjustments for incorrectly excluded hospitals and units.

(a) * * * 

(1) A hospital that was excluded from the prospective payment systems specified in 

§412.1(a)(1) or paid under the prospective payment system specified in §412.1(a)(3), as a new 

rehabilitation hospital for a cost reporting period beginning on or after October 1, 1991 based on 

a certification under §412.29(c) of this part regarding the inpatient population the hospital 

planned to treat during that cost reporting period, if the inpatient population actually treated in 

the hospital during that cost reporting period did not meet the requirements of §412.29(b). 

(2) A hospital that has a unit excluded from the prospective payment systems specified in 

§412.1(a)(1) or paid under the prospective payment system specified in §412.1(a)(3), as a new 

rehabilitation unit for a cost reporting period beginning on or after October 1, 1991, based on a 

certification under §412.29(c) regarding the inpatient population the hospital planned to treat in 

that unit during the period, if the inpatient population actually treated in the unit during that cost 

reporting period did not meet the requirements of §412.29(b). 
 185

(3) A hospital that added new beds to its existing rehabilitation unit for a cost reporting 

period beginning on or after October 1, 1991 based on a certification under §412.29(c) regarding 

the inpatient population the hospital planned to treat in these new beds during that cost reporting 

period, if the inpatient population actually treated in the new beds during that cost reporting 

period did not meet the requirements of §412.29(b). 

* * * * * 

5. Section 412.630 is revised to read as follows: 

§412.630 Limitation on review.

 Administrative or judicial review under sections 1869 or 1878 of the Act, or 

otherwise, is prohibited with regard to the establishment of the methodology to classify a patient 

into the case-mix groups and the associated weighting factors, the Federal per discharge payment 

rates, additional payments for outliers and special payments, and the area wage index. 
CMS-1448-P 

Authority: (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare--

Hospital Insurance; and Program No. 93.774, Medicare--Supplementary Medical 

Insurance Program) 

Dated: April 16, 2013.

 _______________________________ 

Marilyn Tavenner, 

Acting Administrator,

 Centers for Medicare & Medicaid Services.

Approved: April 25, 2013.

 __________________________________ 

Kathleen Sebelius, 

Secretary. 

BILLING CODE 4120-01-P 

[FR Doc. 2013-10755 Filed 05/02/2013 at 4:15 pm; Publication Date: 05/08/2013]